Treasury Review Audit Report

TREASURY REVIEW AUDIT
REPORT
TABLE OF CONTENTS (1/2)
04 Treasury Review Audit Report: Sample 1 30 Treasury Review Audit Report: Sample 2
05 Executive Summary 31 Executive Summary
06 Objectives and Scope 32 Objectives and Scope
07 Work Performed 33 Summary of Procedures Performed
08 Acknowledgments 34 Acknowledgements
09 Action Matrices 35 General Background
18 Appendix A: Leading Practices Scorecard 42 Action Matrix
22 Appendix B: Leading Control Practices Scorecard 43 Best Practices
27 Appendix C: Domestic Cash Management Process 44 Appendix: FX Strategy/Background
Flow 46 Treasury Review Audit Report: Sample 3
28 Appendix D: Corporate Finance Process Flow
47 Executive Summary
29 Appendix E: Summary of Treasury Testing
49 Objectives, Scope and Procedures Performed
50 General Background
51 Detailed Issues and Observations
61 Appendix I: Internal Control Assessment
This report provides management with information about the condition of risks and internal controls at one point in time. Future changes in environmental factors and actions by
personnel may significantly and adversely impact these risks and controls in ways that this report did not and cannot anticipate.
2
TABLE OF CONTENTS (2/2)
63 Treasury Review Audit Report: Sample 4 80 Treasury Review Audit Report: Sample 5
64 Executive Summary 81 Payment Authorization and Release Process
Proposed Implementation Procedures
65 Objective and Scope
89 Cash Flow Forecasting Process
66 Summary of Procedures Performed
Proposed Implementation Procedures
68 Acknowledgments
69 General Background
70 Background: Cash Management and Wire
Transfers
73 Background: Investments
75 Background: FX
76 Action Matrix
77 Best Practices
78 Appendix: FX Background/Strategy
3
REPORT: SAMPLE 1
EXECUTIVE SUMMARY
We have completed our operational review of Company XYZ’s treasury-corporate finance (corporate finance) group and have found that the
internal control environment is effective. The corporate finance group performs or facilitates the following functions: cash management and
forecasting, short-term investing, short- and long-term debt funding, equity funding, monitoring hedging activities, project and subsidiary
finance support, and oversight of the pension trust and other funds. These functions are supported by System ABC, the controlled
disbursement system (CDS), Hyperion and MS Excel. In addition to these systems, manual processes exist for producing management
reports and cash management and forecasting data. Wire transfers are manually posted to the general ledger by corporate accounting.
Since the Company Y acquisition, corporate finance has utilized two systems for domestic cash management. Treasury management is in
the process of researching and identifying a lead cash management bank for an integrated domestic cash management and forecasting
solution.
While we determined that appropriate controls exist over the corporate finance functions through interviews, observations of key processes
and transactional testing, we identified some opportunities for improvement.
The following summarizes the issues noted as a result of our The following summarizes the issues noted as a result of our
review of the controls and processes surrounding the systems review of the controls and processes surrounding the Company
supporting the treasury department: XYZ treasury organization:
• Anti-virus software has not been installed on the Windows NT • Domestic cash management and forecasting should be fully
terminal server housing the System ABC platforms. integrated.
• Two parallel systems are used to gather daily cash • Domestic cash forecasting variances significantly fluctuate
information. The process is manually intensive and inefficient. daily.
• Policies and/or procedures for some key corporate finance
• Sensitive DESMAC diskettes were not stored in a secure
functions are not formally documented.
location while not in use.
• Signatory authorizations and limits for wire transfers are
• CDS Connection has been installed locally at each of the site outdated.
locations; however, reviews of system configuration
• The corporate secretary’s office received safeguarded assets
parameters do not occur periodically.
from Company Y, but not all these assets have been delivered
• Reviews of user access privileges do not appear to be to treasury for deposit in the treasury safe.
occurring periodically. • Personnel goals have been established and formally
communicated; however, formal job descriptions do not exist.
5
OBJECTIVES AND SCOPE
Objective
The objective of our review was to perform an operational assessment of the key business processes for the
corporate finance group. This included performing the following tasks:
• Obtain an understanding of the relevant processes.
• Evaluate processes’ effectiveness and efficiency.
• Evaluate the internal control environment by testing selected control objectives.
• Assess compliance to corporate policies and procedures.
• Identify opportunities for process and internal control improvements.
• Provide best practices where opportunities for improvement exist.
Scope
The scope of this review included the corporate finance functions, which we defined as the following processes:
• Cash management and forecasting
• Short-term debt funding
• Trust and fund management
Internal control evaluations were based on interviews with management and personnel, observation of key processes,
and transactional testing.
6
WORK PERFORMED
01 Related corporate policies and procedures were

reviewed. 05 The corporate finance processes were compared to
established best practices.
02 06
Key treasury and information systems management The corporate finance internal control environment
and personnel were interviewed. was evaluated to best control practices.
Detailed transaction testing of commercial paper, The effectiveness and efficiency of business
03 letters of credit, wire transfers and trust fee

calculations (see Appendix E) were performed. 07 processes were assessed, noting opportunities for
improvement.
A high-level review of the information systems
04 environment as related to the corporate finance

group was conducted.
7
ACKNOWLEDGEMENTS
We are pleased to take this opportunity to thank various management and personnel of the treasury department for the
courtesies extended to our representatives and their considerable cooperation.
Treasurer (Insert Name)
Assistant Treasurer (Insert Name)
Corporate Accounting Manager (Insert Name)
Senior Counsel (Insert Name)
Director of Corporate Business

(Insert Name)
Systems
Information Services (Insert Name)
Senior International Treasury

(Insert Name)
Analyst
Senior Treasury Analyst (Insert Name)
Treasury Coordinator (Insert Name)
Accounting Analyst (Insert Name)
Associate Accounting Analyst (Insert Name)
Financial Systems Support (Insert Name)
Legal Entities Coordinator (Insert Name)
8
ACTION MATRIX (1/9)
The following matrix contains important issues and observations related to treasury functions. Management’s action plan is
described along with the responsible party. Also, observations have been given a priority ranking of high, medium or low,
representing a degree of control risk or opportunity for process improvement. Each issue will be addressed according to the
implementation date agreed to by management and internal audit. A follow-up review will be performed based on this
information.
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Cash Management and Forecasting A best-practice (Insert Name) Treasury is now looking High (Insert Date)
1 Domestic and international cash

management and forecasting are
approach to cash
management and
(Insert Name) for a lead cash
management bank and
forecasting is a fully (Insert Name) integrated domestic
performed separately. There is limited
systems infrastructure to support the integrated global (Insert Name) treasury workstations. A
linkage of corporate global strategies solution combining request for proposal
domestic and (Insert Name) (RFP) is being prepared
and cash management and forecasting.
Treasury is now addressing domestic international cash for distribution to
cash management. Internationally, activity and projections. vendors.
Company XYZ uses its Z Treasury Retain an independent
Center (ZTC), which acts as a banking consultant to assist with
facility, to efficiently manage cash. selecting domestic cash
Foreign subsidiaries loan excess funds management solutions.
to other foreign subsidiaries at improved
yields on the lending side and reduced
interest rates to those entities needing
funding. The ZTC earns fees on both
ends of the transactions and enjoys low
Country Z tax rates.
Business Impact/Risk:
• Global needs may not be known
quickly.
• Processes may be inefficient and
inaccurate.
9
ACTION MATRIX (2/9)

Bank Relationships Identify and implement (Insert Name) Identify, assess and High (Date)
Currently, two parallel systems are one fully integrated (Insert Name) select a lead cash
2 utilized to query daily domestic banking cash management
system for querying, (Insert Name)
management bank for
domestic cash
activity and to gather cash management
data one for Company XYZ and one for gathering, transacting (Insert Name) management and
Company Y. The process of gathering and reporting cash forecasting. Minimally,
management (Insert Name) replace the domestic
this data is manually intensive and
inefficient. information. cash management
system with an
Business Impact/Risk: integrated cash
• Processes are inefficient. management system
having electronic
• Time spent addressing separate linkage to the general
processes result in lost opportunities. ledger.
Since the Company Y acquisition, two Select a lead cash (Insert Name) Select a lead cash High (Date)
primary bank accounts have been management bank and management bank and
3 utilized for Company XYZ’s domestic
transactions. This increases processing
consolidate bank
accounts.
(Insert Name)
(Insert Name)
consolidate bank
accounts.
time, as the senior treasury analyst must (Insert Name)
query the banks through two system
modules and corporate accounting must (Insert Name)
reconcile two accounts.
• Use of funds may be costly or
inefficient.
• Processes may be inefficient.
• Time spent addressing separate
processes may result in lost
opportunities.
• Fees may be higher.
10
ACTION MATRIX (3/9)

Cash Forecast Accuracy and Evaluate the (Insert Name) Develop and Medium (Insert Date)
Timeliness effectiveness of the disseminate a standard
4 Domestic cash forecasts are submitted current cash
(Insert Name)
(Insert Name)
format for daily, weekly
monthly to corporate treasury. forecasting and/or monthly as-
Consolidated cash forecasts are not methodology. (Insert Name) appropriate cash
prepared. Consider creating and forecasting for use by
(Insert Name) the domestic units.
Additionally, domestic cash forecasts are implementing a
prepared, and daily, the senior treasury standard form on which
analyst verifies the accuracy and sites submit cash
reasonableness of the cash forecasts forecasts.
submitted. Based on the data received, Monitor the
variances between forecasts and bank effectiveness of the
activity range from approximately $XXX new form and continue
to $XXX. Some reasons for variances to measure cash
relate to the Company Y acquisition and forecast accuracy.
personnel changes.
Additionally, some sites do not meet the
first of the month submission deadline.
According to an assistant treasurer, prior
to the Company Y acquisition, treasury’s
domestic cash forecasting generally was
accurate and Company Y management
did not produce monthly forecasts.
• Forecasting measures may be
inaccurate.
• Future cash needs may not be
identified.
• Funding risk may arise.
11
ACTION MATRIX (4/9)

Manual Processes Ensure that the new (Insert Name) • Retain an High (Insert Date)
system has the independent
5 Several systems are utilized by the
treasury department. These systems following functionality: (Insert Name) consultant to assist
include System ABC, CDS Connection (Insert Name) with the selection of
• Automated bank a domestic cash
and Hyperion. polling (Insert Name) management
In addition to these disparate systems, • General ledger (Insert Name) solution.
MS Excel is extensively used to produce interface
meaningful cash management and • Define system
• Foreign currency requirements.
forecasting reports. MS Excel requires purchases with real-
many manual processes to generate time exchange rates • Establish selection
reports. criteria.
• A payments module
Treasury personnel have retained an able to initiate • Evaluate canned
independent consultant to assist with the electronic payments treasury workstation
selection of a domestic cash from one input applications.
management solution. screen
• Select and
Business Impact/Risk: • An adequate security implement
• Processes are manual and inefficient. administration appropriate treasury
module workstation
• Data capture and reporting may be applications.
inaccurate. • Value-added system
generated reports • Train end users on
• Disaster recovery procedures may be
worse. the systems
functionality and
security
requirements.
12
ACTION MATRIX (5/9)

Policies and Procedures Ensure that consistent (Insert Name) Formalize and Medium (Insert Date)
practices, policies and communicate policies,
6 While policies and procedures have
been established for some treasury procedures are
(Insert Name)
as delineated in the
functions, in general they are dated. established and Recommendation
Additionally, policies and/or procedures reviewed for all section.
for elements of the following treasury functions and updated
functions have not been formally annually to reflect
documented: current practices.
Formally establish the
• Cash forecasting following policies
• Commercial paper issuance and/or procedures:
• Trust and fund management Cash Forecasting
Business Impact/Risk: Detailed procedures
exist for preparing cash
• Policies and procedures may be forecasts; however, a
inconsistently applied. higher-level
• Processing may be inaccurate. explanation defining
• Process knowledge may be lost. the purpose of cash
forecasts should be
established,
documented and
communicated.
Minimally require the
reporting of key cash
forecasting data
elements for large
dollar transactions.
Commercial Paper
Issuance (Insert Name) Formalize and Medium (Insert Date)
communicate policies,
Formally establish (Insert Name) as delineated in the
guidelines for the Recommendation
issuance of commercial section.
paper.
13
ACTION MATRIX (6/9)

Policies and Procedures (Continued) Include a statement
regarding which staff
6 members are
authorized to issue
commercial paper on
behalf of Company
XYZ and formally
communicate it to
commercial paper
dealers. Additionally,
procedures should be
formally established
regarding the
management review
required for commercial
paper efficiency, cost
and execution.
Trust and Fund
Management (Insert Name) Formalize and Medium (Insert Date)
Establish (Insert Name) communicate policies,
policies/procedures for as delineated in the
reviewing and Recommendation
monitoring trust and section.
funds, including
trust/fund manager
selections and
changes, fund
management
performance (including
taking corrective
action), and
management fee
structure and payment.
14
ACTION MATRIX (7/9)

Signatory Authorizations Update the signatory (Insert Name) The senior treasury High (Insert Date)
Signatory authorizations for wire authorizations and (Insert Name) analyst will obtain
7 transfers for both international and limits for wire transfers. updated wire transfer
signatures and limits.
domestic wire activity have been
established; however, based on
conversations, the authorized signers do
not represent the current Company XYZ
management structure. For example,
Company Y management signatures
have not been received. Similarly,
authorization limits do not accurately
represent current wire transfer
requirements.
• Payments may be unauthorized.
• Payment authorization may not be
verified.
Safe Ensure that Company (Insert Name) Deliver all Company Y- High (Insert Date)
Company Y-held stock certificates have Y-held stock certificates (Insert Name) held stock certificates to
8 been received by the corporate
secretary’s office, but not all certificates
are properly recorded
and deposited in the
the treasury safe.
have been delivered to treasury for treasury safe.

placement in treasury’s fireproof safe.
• Transactions or activity may be
unauthorized.
15
ACTION MATRIX (8/9)

Job Descriptions Establish formal job (Insert Name) Establish formal job Medium (Insert Date)
Personnel goals have been established descriptions. (Insert Name) descriptions.
9 and formally communicated; however,
formal job descriptions are not in place.
Employee Training Establish targets for (Insert Name) Calendarize formal Medium (Insert Date)
Corporate sponsored, formal technical formal technical training (Insert Name) technical training by
10 training is limited; however, a training
budget is in place to cover training costs.
by position. position annually.
• Financial risk may be managed
inaccurately.
Information Systems Perform detailed (Insert Name) Utilize a standardized High (Insert Date)
CDS Connection reviews of the CDS (Insert Name) work program to
11 CDS Connection has been installed Connection system evaluate system
locally at each of the site locations. configuration configuration
Given limited training and the on-site parameters at the site parameters at the site
installations, site location personnel may locations. locations.
be unclear as to appropriate CDS Follow up on system Advise site personnel of
Connection system configuration and deficiencies. deficiencies and follow
usage. up to ensure
Business Impact/Risk: compliance.
• Access to system resources may be
unauthorized.
• Approval of unauthorized transactions
may result in financial loss.
16
ACTION MATRIX (9/9)

User Access Review user-access (Insert Name) Utilize system- Medium (Insert Date)
privileges to system generated reports to
12 Reviews of user access privileges do not
periodically occur. resources and the
(Insert Name)
review user access
Business Impact/Risk: Windows NT terminal privileges quarterly
server quarterly. (e.g., June, September,
• Access to system resources may be December).
unauthorized.
• Sensitive data may be lost.
Information Systems Install anti-virus (Insert Name) Install anti-virus High (Insert Date)
software on the software on the
13 Anti-Virus Software
Anti-virus software has not been Windows NT server
(Insert Name)
Windows NT server that
installed on the Windows NT terminal that houses the System houses the System ABC
server that houses the System ABC ABC platforms. platforms.
platforms. Refer to CERT’s
Business Impact/Risk: website for virus
updates.
• Access to system resources may be
unauthorized. Install the necessary
patches as-needed.
DESMAC Diskettes The primary DESMAC (Insert Name) The primary DESMAC High Completed
diskettes should be diskettes have been
14 The sensitive DESMAC (Data Encryption
Standard Message Authentication Code) stored under lock and
(Insert Name)
placed in a locked
diskettes were not in a secure location key while not in use. credenza while not in
while in use. The backup DESMAC use.
Business Impact/Risk: diskettes should be The backup DESMAC
• Access to system resources may be stored in the safe diskettes have been
unauthorized. located within the placed within the
treasury department. treasury safe.
17
APPENDIX A: LEADING PRACTICES SCORECARD:
MANAGE CASH FLOW (1/2)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref
Select core cash management banking partners. Company XYZ is currently the lead cash 1, 2 and 3
management bank; however, with the
Benefits include:
need to have one, fully integrated cash
• More leverage is used during negotiations with management system, treasury is now
banks while decreasing dependency on any single looking for a new lead cash management
institution. bank through which all necessary cash
• Access to new cash management products and management functions can be integrated.
services is greater. A request for proposal (RFP) is being
• Bank charges and reconciliation costs are lower. prepared for distribution to vendors.
Develop accurate cash forecasting models. Two cash management systems are 2, 3 and 4
Benefits include: utilized, and the process of gathering cash
management information is inefficient and
• Treasury organization effectiveness is increased.
manually intensive. This cumbersome
• Risks of overfunding payables and excess balances data compilation is further hindered by
are lessened. inaccurate information provided from sites.
• Access to funds when needed to sustain operations Together, these factors are the driving
or to expand business is greater. forces behind variances in the forecast.
Improve investment yields at the lowest cost. Clear written policies outlining investment N/A
Benefits include: philosophy, roles and responsibilities exist.
• Cash flow is improved. The finance committee directs and
approves investment practices.
• Focus on investment opportunities is clearer.
Investments and hedging activity are used
• More cash is available for investment in the to cover currency and interest rate risk. A
business. matched book is maintained with no open
positions. Idle funds are generally swept
daily into conservative interest-bearing
accounts.
Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in order to Limited Use: “Best practice” recommended to improve
achieve “best practice” status. process efficiency/effectiveness.
18
MANAGE CASH FLOW (2/2)
Review the cash management system regularly. Treasury personnel utilize system- 12
generated reports and audit logs to
Benefits include:
facilitate their review of the System ABC
• Operating effectiveness once inefficiencies are platforms; however, periodic reviews of
identified and improved is greater. user access privileges do not occur
• More opportunities to improve liquidity are identified. regularly.
• Fraud opportunities are minimized.
Create a centralized cash management Treasury is now addressing an integrated 1

infrastructure that serves global needs. solution to domestic cash management.
Benefits include: Internationally, Company XYZ uses its Z
Treasury Center (ZTC), which acts as a
• Foreign exchange exposure is minimized.
banking facility, to efficiently manage cash.
• Transaction costs are reduced. Through the ZTC, foreign subsidiaries
• Transaction-related information flow is improved. loan excess funds to other Company XYZ
foreign subsidiaries at improved lending
yields, and reduced interest rates to those
entities needing funding. The ZTC earns
fees on both ends of the transactions and
enjoys low Country Z tax rates.
19
MANAGE FINANCIAL RISK (1/2)
Evaluate financial risks in the context of business Financial risk is conservatively managed N/A
objectives. through the finance committee, which
directs and approves investment
Benefits include:
practices. Investments and hedging
• Risk management resources are directed to areas activity are used to cover currency and
of greatest value. interest rate risk. A matched book is
• Financial risk managers are better partners in the maintained with no open positions. Idle
overall business. funds are generally swept daily into
• Significant risks are evaluated. conservative interest-bearing accounts.
Involve senior management in financial risk The CFO, finance committee and senior N/A
management. management team (SMT) are regularly
Benefits include: informed of major financing issues and/or
risk.
• Accountability is placed where it belongs in the
organization.
• Vision and direction to the financial risk
management function are identified.
Establish written risk management policies that According to one of the assistant N/A
define the goals and limits for hedging and trading treasurers, formal written policies and
activities. procedures are in place.
Benefits include:
• The strategy set forth by senior management is
implemented.
• The likelihood of unexpected, massive impacts from
trading activities is reduced.
20
APPENDIX A: BEST PRACTICES SCORECARD:
MANAGE FINANCIAL RISK (2/2)
Educate treasury personnel and make them an A training budget has been created for the 10
integral part of the financial risk management year (Insert Year); however, training plans
process. have yet to be created for and
communicated to treasury personnel.
Benefits include:
• Managers are introduced to the risk impacts of
everyday decisions.
• Managers are allowed a degree of control over
factors that affect their bottom line.
Monitor financial risk exposure and the Corporate treasury personnel have N/A
effectiveness of financial risk management established limits for the site locations and
strategies. utilize trend analyses to assist with the
Benefits include: monitoring of financial risk exposure to
Company XYZ.
• Executive management is provided with an
independent view of risk management activities.
• Rapid changes in strategy are allowed when
needed.
Adopt clear and consistent accounting and Practices are in place to work with N/A
disclosing practices for risk management activities. corporate accounting to produce accurate
Benefits include: SEC and financial statement reporting
• Transactions are properly tracked. disclosures. Clear accounting policies and
procedures are in place.
• Investors are provided with necessary information.
• A basis for analyzing losses is provided.
21
APPENDIX B: LEADING CONTROL PRACTICES
SCORECARD: MANAGE CASH FLOW (1/5)
Establish a reporting policy, assuring that relevant Domestically, changes and relevant N/A
information is adequately communicated to key information are clearly communicated to
personnel timely. corporate accounting and site locations.
Internationally, regulatory reporting is
Benefits include:
performed by the sites.
• Performance of the treasury function is improved.
• Cash management decisions are based upon
relevant and accurate information.
Implement a “self-control” approach to assessing The degree of improvement is limited by N/A

business risk. Design, implement and improve risk current manual and bank systems.
controls and measure performance and monitor the Treasury is working toward identifying and
process. implementing a domestic integrated cash
Benefits include: management system.
• Business risk identification is more effective.
• Employees are empowered.
• Performance with business strategies is enhanced.
Maintain compliance to loan restrictions. Domestically, corporate accounting N/A

Benefits include: monitors compliance with loan terms and
• Fines, penalties, litigation and/or loss of reputation conditions for the revolving line of credit.
are prevented. Internationally, subsidiaries monitor
compliance with loan terms and
• Noncompliance with loan covenants, which could
conditions. Copies of compliance reports
result in decreased liquidity, is prevented.
are received and reviewed by the
treasurer and assistant treasurers. Issues
are elevated to the finance committee.
22
Monitor the effectiveness and efficiency of the Treasury is part of the established internal N/A
process using internal audit. audit plan.
Benefits include:
• Weaknesses in design and operation of the internal
controls are identified.
• Errors and/or unauthorized transactions are
identified.
• Accuracy and reliability of outputs is improved.
Align process strategies with overall corporate • Domestically: Seek an integrated cash 1
strategies. management solution.
Benefits include: • Internationally: Use the Z treasury
center to manage cash in a tax-efficient
• Process management is well-informed.
manner, primarily in (Insert Location).
• Assurance that the process is contributing to the Process strategies are weak in (Insert
overall corporate goals and objectives exists. Location) and (Insert Location).
• Greater movement toward realizing the process’s
maximum benefits occurs.
Continuously improve the process and The cash management process is N/A
performance. currently being assessed. While treasury
Benefits include: is “always aware of the next level,”
• Quality of work is increased. changes are made if cost/benefit analyses
support the improvements.
• Cycle time is decreased.
• Employee satisfaction is increased.
23
Establish, document and communicate policies Most policies and procedures are in place 6 and 9
and procedures to ensure that all personnel but generally they are dated.
understand objectives and responsibilities. Recommendations for improvement are
noted in the action matrix.
Benefits include:
Treasury personnel goals have been
• Standards, which allow the company to monitor and
established and formally communicated;
enforce the policies, are defined.
however, formal job descriptions and desk
• Higher quality and consistent work is done. procedures are not in place.
• Mistakes, confusion and complaints are minimized.
Protect the integrity of systems, databases and Anti-virus software has not been installed 12 and13
records. on the Windows NT terminal server that
Benefits include: houses the System ABC platforms.
Reviews of user access privileges to
• Errors and processing inconsistencies are lessened.
sensitive directories, databases and
• Cycle time is reduced. systems do not occur periodically. The
• User satisfaction is improved. sensitive DESMAC (Data Encryption
• Output quality is increased. Standard Message Authentication Code)
diskettes were not in a secure location
while in use; however, they have since
been stored in secure locations.
24
Ensure that all debt transactions are processed Debt transactions are processed and N/A
and recorded on time. recorded timely. A tickler file is used to
ensure that all debt transactions are
Benefits include:
processed and recorded on time. MS
• Recorded balances will reflect realistic valuations. Excel is used to track these transactions.
• Unauthorized debt transactions are detected. Processes are manual intensive but do
• Account balances are accurately recorded. not appear to warrant automated data
transmission and capture.
Ensure that investment, borrowing, disbursement Generally, investments, borrowings and 6

and other financial transactions are properly disbursements are properly authorized
authorized. and well-documented. Weekly
management review or approval is
Benefits include:
required for commercial paper issuance
• Records of investment transactions are accurate. and cash balances.
• Recorded balances reflect realistic valuations.
• Investment income is recorded accurately.
Maintain lines of credit that are adequate to meet The new $XXX line of credit is sufficient to N/A
recurring and unexpected funding requirements. meet current and projected funding
requirements. Company XYZ’s objective is
Benefits include:
to maintain $XXX in liquidity, which is
• Financing to support strategic growth and operating accomplished through the revolving line of
activities is adequate. credit and requires a debt-to-capital ratio
• Risk of business interruption due to cash shortages of 0.6.
is minimized.
25
Maximize returns from investments of excess cash Most entities have sweep accounts. Those N/A
funds. which do not invest excess funds in
money market accounts.
Benefits include:
• Return on investment is improved.
26
APPENDIX C: DOMESTIC CASH MANAGEMENT
PROCESS FLOW
Receive Cash Forecasts and Set Cash Position and Process Wire Transfer Collect and File Supporting
Bank Balance Information Offset Net Cash Requests Documentation
• The site locations submit • The daily bank balances and all • Wire transfer requests are  Reports are generated daily,
monthly cash forecasts to planned cash transactions are received daily from site which show all cash transactions
corporate treasury. netted to determine the day’s locations. on concentration accounts.
 The senior treasury analyst cash position. As of (Month, • The senior treasury analyst  Control data sheets are
maintains a list of all site Year) Company XYZ is a net verifies the signature prepared to monitor the
locations and ensures that borrower. authorization based on company’s daily cash activity,
forecasts are properly submitted. • The senior treasury analyst familiarity. net cash position, commercial
• The senior analyst consolidates determines how much › Signature authorizations and paper activity and cash
the data provided by the site commercial paper should be limits are outdated. Similarly, the forecasts.
locations into a standard issued and what maturities established authorization limits  The senior treasury analyst
template. should be selected. are not reflective of current wire balances the bank activity to the
• The senior treasury analyst limits. control spreadsheets.
• The total cash forecast amount
contacts the authorized dealers
per site location is distributed  Pre-format wire transfers identify • A MS Excel spreadsheet is
to obtain current commercial
throughout the week based on customer information such as created, which identifies all
paper interest maturities and
historical operations activity. bank and account number. The disbursements and receipts. The
rates. The rates are selected and
 Daily, the forecasts are pre-format template must be spreadsheet is forwarded to
recorded.
compared to actual bank activity • The commercial paper activity is approved by an assistant corporate accounting.
in a MS Excel spreadsheet. treasurer. • Corporate accounting manually
primarily handled by the senior
› Typically, the forecasts are treasury analyst. Review of the  The treasury credit analyst, codes and posts the activity to
completed and consolidated by decision is periodically senior international treasury the general ledger based on the
the third of each month. performed. analyst or an assistant treasurer data submitted by the senior
Recently this deadline has not  A strict short-term investment review all pre-formatted transfers treasury analyst.
been met. policy approved by both the CFO daily. Any non-pre-formatted  Corporate accounting reconciles
› The senior treasury analyst and treasurer has been written, transfers must be approved by the cash activity per the bank
manually queries two bank limiting such transactions to no an assistant treasurer. statements to the general ledger.
accounts (one each for more than 90 days. The reconciliation is performed
Company XYZ and Company Y) daily.
for the day’s activity, receipts
and disbursements. A lead cash
management bank will be
selected, and accounts will be
consolidated.
• Process Point  Internal Control Point (Manual) o Internal Control Point (System-Based) › Internal Control Weakness
27
APPENDIX D: CORPORATE FINANCE PROCESS FLOW
Monitor Cash Balances and Report to the Finance
Establish Debt Instruments Perform Project Financing
Hedge Financial Risk Committee
 The Company XYZ Corporation • On an ad hoc basis, treasury • A strict foreign exchange  Presentations to the finance
X/X Bylaws indicate that the vice assists subsidiaries with project exposure management policy committee are performed on an
chairmen and treasurer have financing by identifying, sourcing was published in (Month, Year). ad hoc basis.
authority to sign notes and and negotiating project funding. • The ZTC, as needed, performs
guarantees, and along with the • Company XYZ uses its Z hedging to cover interest rate,
corporate secretary, Treasury Center (ZTC), primarily foreign exchange and
consummate debt and equity in (Location), as a banking commodity risk.
transactions. facility to efficiently manage cash • All positions are covered, and a
• The treasurer and assistant flow. matched book is maintained.
treasurers are actively involved • Foreign subsidiaries loan • A monthly cash flow statement is
in maintaining and/or obtaining excess funds to other foreign prepared in MS Excel based on
debt and equity funding for the subsidiaries at improved subsidiary financial statement
corporation. lending yields and reduced information provided.
• A new $XXX line of credit was interest rates to the entities • The cash flow statement
recently obtained. needing funding. identifies international subsidiary
• Bonds are periodically issued. • The ZTC earns fees on both cash positions and flows and
› Guidelines do not exist for ends of the transactions and hedging gains and losses.
executing commercial paper enjoys low Country Z tax • The statement is reviewed and
issuance. Additionally, names of rates. monitored by treasury. Any
staff members currently  Each month, the ZTC sends significant issues are reported to
authorized to issue commercial copies of its income statement the CFO.
paper on behalf of Company and balance sheet to treasury
XYZ are not specified internally for review.
or with dealers.
› Formal procedures do not exist
regarding the type of
management review required for
commercial paper efficiency,
cost and execution.
• Process Point  Internal Control Point (Manual) o Internal Control Point (System-Based) › Internal Control Weakness
28
APPENDIX E: SUMMARY OF TREASURY TESTING
We judgmentally selected a sample of wire transfer payments to determine if:

• Wire transfers were properly authorized by the site location and corporate personnel.
• Appropriate reviews were performed at the corporate office.
• Documentation was sufficient to support transactions.
• Wire transfers were processed timely.
• Duties were properly segregated.
• Bank confirmations were obtained and agreed to the transfer amount requested.
Exceptions were not noted.
We judgmentally selected a sample of issued commercial paper to determine if:

• Commercial paper issuance complied with corporate policies and procedures.
• Decisions were appropriately supported by data.
• Adequate reviews of the issuances were performed.
Exceptions were noted. See Action Matrix No. 6.
We judgmentally selected a sample of standby letters of credit (letter of credit) to determine if:
• The letter of credit was properly authorized by corporate personnel.
• The purpose was documented and appropriate.
• Documentation was sufficient to support the transaction.
We judgmentally selected a sample of trust asset money management fees to determine if:
• Fees were accurately calculated.
• Fees were properly approved.
29
REPORT: SAMPLE 2
EXECUTIVE SUMMARY
In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange hedging functions
are less than adequate. The following primary opportunities for improvement have been identified through interviews and process observations
with treasury personnel and limited transaction testing.
• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange, treasury
accounting, subsidiary procedure-related policies). Formal, written cash management or treasury accounting policies do not exist.
• Cash management operations at subsidiary corporation could be combined with Company XYZ Inc. treasury.
− Excess cash balances at subsidiary (occasionally as high as $X million) are not automatically transferred to Company XYZ Inc. for
investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were not
reconciled to broker statements or treasury records.
− General ledger investment transactions are not accurately recorded. During our review, we noted two booking errors where
investments were recorded into the wrong general ledger account (no adverse financial effect). In each case, the daily transaction
report prepared by treasury was incorrect. Adjusted journal entries were made to reverse each error prior to identifying the error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated and include
former Company XYZ Inc. employees. These employees are, technically, still allowed to initiate transactions on behalf of Company XYZ
Inc.
• Foreign exchange exposure hedges are not formally approved. Policy requires written documentation from the chief financial officer of all
hedge contracts.
• Confirmations sent by counterparties are received directly by the people who execute foreign exchange hedging transactions.
• Management reporting could be improved in all areas (specifically, investments and foreign exchange hedging). Treasury currently submits
single page documents to executive management with little detail of key treasury measures (e.g., yield, portfolio composition, foreign
exchange exposures, etc.).
• Reconciliations of the yen bank account should be reviewed by the treasury manager to ensure that they have been properly prepared.
This review should be documented.
Please see the Action Matrix section for further details.
31
Design
EXECUTIVE SUMMARY option
In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange hedging
functions are less than adequate. The following primary opportunities for improvement have been identified through interviews and
process observations with treasury personnel and limited transaction testing.
• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange,
treasury accounting, subsidiary procedure-related policies). Formal, written cash management or treasury accounting policies
do not exist.
• Cash management operations at subsidiary corporation could be combined with Company XYZ Inc. treasury.
− Excess cash balances at Subsidiary (occasionally as high as $X million) are not automatically transferred to Company XYZ
Inc. for investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were
not reconciled to broker statements or treasury records.
investments were recorded into the wrong general ledger account (no adverse financial effect). In each case, the daily
transaction report prepared by treasury was incorrect. Adjusted journal entries were made to reverse each error prior to
identifying the error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated
and include former Company XYZ Inc. employees. These employees are, technically, still allowed to initiate transactions on
behalf of Company XYZ Inc.
• Foreign exchange exposure hedges are not formally approved. Policy requires written documentation from the chief financial
officer of all hedge contracts.
• Management reporting could be improved in all areas (specifically, investments and foreign exchange hedging). Treasury
currently submits single page documents to executive management with little detail of key treasury measures (e.g., yield,
portfolio composition, foreign exchange exposures, etc.).
• Reconciliations of the yen bank account should be reviewed by the treasury manager to ensure that they have been properly
prepared. This review should be documented.
32
OBJECTIVES AND SCOPE
Objectives
• Assess and evaluate the adequacy of the overall financial control environment.
• Assess and evaluate the adequacy of significant financial and accounting controls.
• Identify opportunities for process and control improvement.
Scope
• This review was limited to the corporate treasury operations at headquarters.

• The period of review was for (Insert Month) XXXX.
• This project did not include a review of the strategic alliance/partnership investments managed outside of corporate treasury.
• The following processes and functions were reviewed:
Cash Management
Wire Transfers*
Investments*
Foreign Exchange Exposure Management*
*Limited detailed testing was performed
33
SUMMARY OF PROCEDURES PERFORMED
We performed the following during our review:
Obtain and review available Company XYZ Inc. corporate treasury policies and procedures related to cash management, investing
01
and foreign exchange exposure management.
02 Interview key treasury and accounting personnel.
03 Observe performance of key treasury processes.
04 Perform detailed testing of outgoing wire transfers and investments.
05 Review domestic and international cash and investment account reconciliations.
06 Review investment manager statements.
07 Analyze the calculation of yen exposures for Q2-YY.
08 Analyze foreign exchange hedging forwards and options for Q2-YY.
09 Evaluate the overall internal control environment.
10 Compare Company XYZ Inc.’s practices with best practices for selected treasury operations.
11 Report on observation and management action plans.
34
ACKNOWLEDGMENTS
We would like to thank all Company XYZ Inc. employees that assisted us in our work during this project. We received input and
assistance from the following personnel:
Corporate Treasury
Name A Treasury Manager
Name B Cash Analyst
Accounting
Name C Accounting Clerk
Your help is key to the success of this project!
35
GENERAL BACKGROUND
During the fiscal XXXX/YYYY internal audit planning process, executive management identified treasury operations for review in the
fiscal XXXX/YYYY audit plan. Treasury operations were last reviewed in August XXXX by audit services.
Corporate treasury is responsible for the following functions for both Company XYZ Inc. and Company XYZ Inc. International:
• Cash management and short-term investing:
− Bank account management, including bank lines of credit and other types of financing as required by Company XYZ Inc.
− Foreign exchange exposure management
− Risk management, including coordinating insurance coverage
− Credit and collections
• Treasury personnel, including one full-time treasury manager and one part-time treasury analyst
36
GENERAL BACKGROUND
During the fiscal XXXX/YYYY internal audit planning process, executive management identified treasury operations for review
in the fiscal XXXX/YYYY audit plan. Treasury operations were last reviewed in August XXXX by audit services.
Corporate treasury is responsible for the following functions for both Company XYZ Inc. and Company XYZ Inc. International:
• Cash management and short-term investing:
− Bank account management, including bank lines of credit and other types of financing as required by Company XYZ Inc.
− Foreign exchange exposure management
− Risk management, including coordinating insurance coverage
− Credit and collections
• Treasury personnel, including one full-time treasury manager and one part-time treasury analyst
37
BACKGROUND: CASH MANAGEMENT AND WIRE
TRANSFERS (1/3)
• As of (Insert Month) (Insert Year), Company XYZ Inc. had worldwide cash and investments of approximately $XXX million (see graph on
next page).
− Treasury personnel perform cash management functions for both Company XYZ Incorporated and international entities. Company
XYZ Inc. subsidiaries perform cash management operations independent from corporate treasury. Subsidiaries’ excess cash is
transferred to corporate treasury (at corporate’s request) for investment.
− Treasury maintains a yen account with Bank A for yen accounts receivable and accounts payable activity. Yen account balances are
not invested due to low Japanese interest rates. Foreign exchange exposure in the yen account is hedged (see FX background).
− Cash management activity is monitored daily.
• The Company XYZ Inc. treasury department currently utilizes System A for all incoming and outgoing wire transactions.
• Treasury personnel hold releasing and approval capabilities within System A. Individuals may perform only one of these functions for
each transaction.
• In the case of a system failure, alternate wire transfer procedures have been established. Wire transfer information may be directly called
into the appropriate bank. A safe wire card is utilized by the releasing party to ensure that only authorized personnel are transferring
company funds. Once released, the wire information is confirmed by another authorized individual with system approval capabilities.
38
BACKGROUND: CASH MANAGEMENT AND WIRE Design
option
TRANSFERS (1/3)
• As of (Insert Month) (Insert Year), Company XYZ Inc. had worldwide cash and investments of approximately $XXX million (see
graph on next page).
− Treasury personnel perform cash management functions for both Company XYZ Incorporated and international entities.
Company XYZ Inc. subsidiaries perform cash management operations independent from corporate treasury. Subsidiaries’
excess cash is transferred to corporate treasury (at corporate’s request) for investment.
− Treasury maintains a yen account with Bank A for yen accounts receivable and accounts payable activity. Yen account
balances are not invested due to low Japanese interest rates. Foreign exchange exposure in the yen account is hedged
(see FX background).
− Cash management activity is monitored daily.
• The Company XYZ Inc. treasury department currently utilizes System A for all incoming and outgoing wire transactions.
• Treasury personnel hold releasing and approval capabilities within System A. Individuals may perform only one of these
functions for each transaction.
• In the case of a system failure, alternate wire transfer procedures have been established. Wire transfer information may be
directly called into the appropriate bank. A safe wire card is utilized by the releasing party to ensure that only authorized
personnel are transferring company funds. Once released, the wire information is confirmed by another authorized individual
with system approval capabilities.
3
9
TRANSFERS (2/3)
Company XYZ INC. Consolidated Cash Balance
as of (Insert Month)
(as of millions of dollars)
Others 3% Short-Term
Total Consolidated Cash Cash 15%
= $ XXX million
Company XYZ
25%
Company A
28%
Company C
15%
Company B 20%
40
TRANSFERS (3/3)
• Wire templates have been established within the System A system. Dual authorization is required for the creation of such templates. In
addition, dual authorization is required for all template changes.
• To process a wire, a wire transfer sheet must be signed and approved by certain Company XYZ Inc. employees, based upon the current
company signature authority policy. Exceptions to this rule exist for overnight investments and payroll payments, which do not require
such approvals.
• Wire information is reconciled to the general ledger monthly by Company XYZ Inc.’s general accounting department.
• The matrix below details the people authorized to initiate and approve wire transfers with their respective processing limits.
Wire Transfer (System A) Authorization Matrix

Users and Approval Limits
Dollar Limits Per User Per

User Dollar Limits Per Transaction Other Access Limitations
Day
Release equals $X million

Name A: Treasury Analyst Up to $X million None
Approve equals $X million

Name B: Treasury Manager Up to $X million None

Name C: Finance Manager Up to $X million None
Release equals $XX million

Total Limits Per Company XYZ Up to $X million NA
Approve equals $XX million
41
BACKGROUND: CASH MANAGEMENT AND WIRE Design
option
TRANSFERS (3/3)
• Wire templates have been established within the System A system. Dual authorization is required for the
creation of such templates. In addition, dual authorization is required for all template changes.
• To process a wire, a wire transfer sheet must be signed and approved by certain Company XYZ Inc.
employees, based upon the current company signature authority policy. Exceptions to this rule exist for
overnight investments and payroll payments, which do not require such approvals.
• Wire information is reconciled to the general ledger monthly by Company XYZ Inc.’s general accounting
department.
• The matrix below details the people authorized to initiate and approve wire transfers with their respective
processing limits.
Wire Transfer (System A) Authorization Matrix

Users and Approval Limits
Dollar Limits Per User Per

User Dollar Limits Per Transaction Other Access Limitations
Day

Name A: Treasury Analyst Up to $X million None

Name B: Treasury Manager Up to $X million None

Name C: Finance Manager Up to $X million None
Release equals $XX million

Total Limits Per Company XYZ Up to $X million NA
Approve equals $XX million
42
BACKGROUND: INVESTMENTS (1/2)
• Excess cash for both incorporated and international accounts are invested daily in overnight money market accounts held with Bank A.
Excess cash from money market accounts is invested short-term with external money managers (Company A, Company B and
Company C).
• Company XYZ Inc.’s current investment policy (last updated [Insert Month] YYYY) is conservative; however, a more aggressive policy
has been developed and submitted to the board for approval. All money managers are required to adhere to this policy in all investments.
All short-term investments are made through money managers.
• All current short-term investments have a maturity of less than four months.
− Of the $XXX million in cash, approximately XX% is held in short-term investments. The remaining X% is short-term cash, consisting
primarily of the Bank A yen cash and overnight money market accounts.
− The following page displays the short-term investment portfolio by instrument type.
• Maturing investments are automatically transferred into a money market account held by the managing institution. From there, the
money is either rolled over into another short-term investment or wired back to Company XYZ Inc.
• Investments are recorded at cost. Cost-to-market value adjustments are minimal due to the short duration of investments.
• Company XYZ Inc. participates in approximately 10 strategic alliances/partnerships. In some cases, dollar investments have been made.
These alliances/partnerships are managed at the executive level (CEO/CFO) and are independent of corporate treasury.
43
Short-Term Investment Portfolio

by Instrument Type
as of (Insert Date), XXXX
(in millions of dollars)
Short-term portfolio includes Average combined taxable

all Company A, Company B equivalent yield as of (Insert
and Company C Date), XXXX.
investments.
Gov’t Agencies 3%
Commercial
Paper
and other 2%
Gov’t Treasuries
20%
Gov’t Treasuries
20%
44
BACKGROUND: FX
• Company XYZ Inc.’s foreign currency

exposure management program is
FX Hedging Results
primarily focused on managing its Q1-XX thru Q3-YY
Average Net FX
transaction exposures. Gains/(Losses) =
$XXX,XXX
• Transaction exposure results
occur mainly from nonfunctional
currency, yen denominated receivables $5,000 FX Translation Gain/(Loss)
and payables.
Impact of Hedge Gain/(Loss)
$4,000 NET FX GAIN/(LOSS)
• yen foreign exchange forward contracts
and yen put, and call options are the
$3,000
primary hedging instruments utilized.
(In Thousands $)
$2,000
• Treasury has concluded that no other
significant foreign currency exposures
$1,000
exist at Company XYZ Inc. that require
hedging.
$0
Series1
($1,000)
($2,000)
Q1-XX Q2-XX Q3-XX Q4-XX Q1-YY Q2-YY* Q3-YY*
($3,000)
*Based on forecasts
45
ACTION MATRIX
(Insert Action Matrix Pages Here)
46
BEST PRACTICES
(Insert Leading Practice Pages Here)
47
APPENDIX: FX BACKGROUND/STRATEGY
FX Strategy and Process Overview
• The treasury manager receives biweekly information regarding forecasted intercompany yen activity from Company XYZ Inc., its
Japanese subsidiary. This information is utilized by the treasury manager to determine Company XYZ Inc.’s expected monthly yen
cash position and net yen balance sheet exposures for each month through the end of the fiscal year. If the yen cash forecast
indicates months in which excess yen will be available, the treasury manager will sell yen forward to reduce this foreign currency
exposure.
• The decision on whether to sell any excess yen forward is made by the treasury manager based on his analysis of the current
foreign exchange market conditions, particularly the current trend in the yen exchange rate in relation to the most recent
accounting yen exchange rate and his level of confidence in the yen forecast.
• Company XYZ Inc. is typically long yen.
− If the yen has been weakened against the dollar, and the treasury manager expects this trend to continue, he will consider
selling any excess yen forward (thus reducing yen exposure and minimizing expected translation losses).
− Additionally, the biweekly yen exposure update performed by the treasury manager might result in changes in the forecasted
yen cash position. Such changes in the forecast, depending on their significance, can result in additional forward yen sales to
keep the hedges in line with the adjusted exposures.
− Yen foreign exchange options are utilized to hedge any remaining net unhedged yen exposures. The strategy utilized by the
treasury manager in this area involves the purchase of a yen put option (maturity date of quarter end, strike price equal to
current yen exchange rate and option amount equal to remaining unhedged quarter end yen exposure). While the treasury
manager purchases this yen put option, he will also sell a yen call option that has the same maturity date and strike price. The
amount of yen covered by this written call option is set at the amount necessary so that the option premium received by
Company XYZ Inc. from the sale of this call option exactly offsets the option premium paid by Company XYZ Inc. on the
purchase of the yen put option. Additionally, according to the treasury manager, Company XYZ Inc.’s unhedged yen exposure
will always remain in excess of the yen covered by the written call option (i.e., the written option is “covered” in that Company
XYZ Inc. maintains sufficient yen positions).
48
APPENDIX: FX BACKGROUND/STRATEGY
• The treasury manager receives biweekly information regarding forecasted intercompany yen activity from Company
XYZ Inc., its Japanese subsidiary. This information is utilized by the treasury manager to determine Company XYZ
Inc.’s expected monthly yen cash position and net yen balance sheet exposures for each month through the end of the
fiscal year. If the yen cash forecast indicates months in which excess yen will be available, the treasury manager will
sell yen forward to reduce this foreign currency exposure.
• The decision on whether to sell any excess yen forward is made by the treasury manager based on his analysis of the
current foreign exchange market conditions, particularly the current trend in the yen exchange rate in relation to the
most recent accounting yen exchange rate and his level of confidence in the yen forecast.
• Company XYZ Inc. is typically long yen.
− If the yen has been weakened against the dollar, and the treasury manager expects this trend to continue, he will
consider selling any excess yen forward (thus reducing yen exposure and minimizing expected translation losses).
− Additionally, the biweekly yen exposure update performed by the treasury manager might result in changes in the
forecasted yen cash position. Such changes in the forecast, depending on their significance, can result in additional
forward yen sales to keep the hedges in line with the adjusted exposures.
− Yen foreign exchange options are utilized to hedge any remaining net unhedged yen exposures. The strategy
utilized by the treasury manager in this area involves the purchase of a yen put option (maturity date of quarter end,
strike price equal to current yen exchange rate and option amount equal to remaining unhedged quarter end yen
exposure). While the treasury manager purchases this yen put option, he will also sell a yen call option that has the
same maturity date and strike price. The amount of yen covered by this written call option is set at the amount
necessary so that the option premium received by Company XYZ Inc. from the sale of this call option exactly offsets
the option premium paid by Company XYZ Inc. on the purchase of the yen put option. Additionally, according to the
treasury manager, Company XYZ Inc.’s unhedged yen exposure will always remain in excess of the yen covered by
the written call option (i.e., the written option is “covered” in that Company XYZ Inc. maintains sufficient yen
positions).
49
BACKGROUND: INVESTMENTS
• Yen Fluctuation
− The purchased yen put option protects Company XYZ Inc. in the event of a weakening yen. In this scenario, translation of the
yen balance sheet exposure will result in a remeasurement loss. The purchased yen put option will increase in value, resulting
in a gain that will offset the remeasurement loss. The written yen call option will expire worthless.
− In the event of a strengthening yen, remeasurement of the yen balance sheet exposure will result in a gain. The purchased yen
put option will expire worthless. The written yen call option, however, will be exercised by the counterparty, resulting in a loss for
Company XYZ Inc. on the option exercise. This loss incurred from the exercise of the written call option will be offset by the
remeasurement gain on the yen exposure (the yen exposure remeasured should exceed the yen covered by the written call
option, as described above, resulting in a net gain).
50
BACKGROUND: INVESTMENTS
• Yen Fluctuation
− The purchased yen put option protects Company XYZ Inc. in the event of a weakening yen. In this scenario,
translation of the yen balance sheet exposure will result in a remeasurement loss. The purchased yen put
option will increase in value, resulting in a gain that will offset the remeasurement loss. The written yen call
option will expire worthless.
− In the event of a strengthening yen, remeasurement of the yen balance sheet exposure will result in a gain.
The purchased yen put option will expire worthless. The written yen call option, however, will be exercised by
the counterparty, resulting in a loss for Company XYZ Inc. on the option exercise. This loss incurred from the
exercise of the written call option will be offset by the remeasurement gain on the yen exposure (the yen
exposure remeasured should exceed the yen covered by the written call option, as described above, resulting
in a net gain).
51
REPORT: SAMPLE 3
EXECUTIVE SUMMARY (1/2)
Internal audit reviewed the treasury function located at corporate headquarters that provides service to the entire firm as a centralized
management function under the direction of the CFO and corporate treasurer. An estimated $X,XXX of funds are transferred, managed and
distributed, including cash positions, foreign exchange and daily cash needs monthly. Banking relationships, primarily Bank A and Commercial
Bank B, service cash management accounts and related foreign exchange activity.
The objective of this review was to obtain an understanding of key processes in the treasury function (cash management, electronic fund
transfers, investments and foreign exchange hedging), evaluate the adequacy and effectiveness of the associated internal controls, and
identify opportunities for process improvements.
The following is a summary of the issues and observations noted during this review. Each issue/observation has been prioritized
based upon its business impact to the company. For each issue, a page reference and agreed-upon area management
implementation plan to address each issue for corrective action have been noted.
See Page
Issues/Observations Priority
No.
Investment activity authorizations and approval limits are not established in the cash investment policy
1. 52
and foreign exchange hedging and electronic funds transfer policies are not documented.
2. Cash forecasting is rarely done, typically not extending further than one day ahead. 53
Effective use of control disbursement accounts and positive pay services should be continuously
3. 54
reviewed for potential cost savings and increased efficiencies.
Low volumes of payables are executed using electronic payments, specifically ACH, in place of checks
4. 55
and wires.
5. The use of nonstandard electronic funds transfer forms should be limited for exceptions. 56
6. The wire transfer/ACH repetitive template setup and change approval process should be segregated. 56
A list of specimen signatures and approval limits is not maintained in treasury to verify proper wire
7. transfer, ACH and special check request authorizations. Overall, disbursement procedures are not 57
documented. Checks held overnight for pickup are not adequately safeguarded.
53
EXECUTIVE SUMMARY (2/2)
See Page
Issues/Observations Priority
No.
A contingency plan is not in place to generate signed checks if the main printer goes out of service for an
8. 58
extended time period.
Foreign exchange policies and procedures and companywide training are needed to communicate roles,
9. responsibilities, dependencies and impacts. Currently, the company experiences significant foreign 59
exchange losses, resulting from inconsistent intercompany activities.
The activities of initiation, matching, confirming and recording FX hedging transactions are not
10. 60
documented and performed by a single individual.
Subsidiary FX hedging best practices have not been assimilated and implemented companywide as
11. 61
applicable.
Bank account structure and services should be documented and reviewed for improved process and cost
12. 61
savings.
Priority Low Medium High
54
OBJECTIVES, SCOPE AND PROCEDURES
PERFORMED
Objectives
• Assess and evaluate the adequacy of applicable treasury and operational internal controls.
• Assess and evaluate the efficiency of applicable business processes.
• Evaluate compliance with applicable policies and procedures.
• Identify opportunities for process and internal control improvement.
Scope
• Cash management
• Disbursements (focus on electronic fund transfers)
• Investments
• Foreign exchange hedging
• Bank relationship management
Summary of Procedures Performed
• Key management and personnel were interviewed regarding strategies, policies and procedures.
• Documentation to support interviews was reviewed.
• Limited transaction testing was performed to validate existing policies and procedures utilized.
55
GENERAL BACKGROUND
Treasury Functions Cash Management Backgrounds

• Cash management • Cash management, investment and foreign exchange
functions are performed by the treasury staff with
• Bank account management
direction from the treasurer and CFO.
• Electronic payments
• The company utilizes cash management services with
• Investments Bank A.
• Foreign exchange exposure management • The treasury function consists of the treasurer and four
• Risk management (insurance)* FTEs. Additionally, six credit and collections and two risk
management FTEs all report to the treasurer.
• Stock buyback program*
• Stock option administration*
* Not in scope of this review
56
Design
GENERAL BACKGROUND option
Treasury Functions Cash Management Backgrounds

• Cash management • Cash management, investment and foreign exchange
functions are performed by the treasury staff with direction
• Bank account management
from the treasurer and CFO.
• Electronic payments
• The company utilizes cash management services with Bank
• Investments A.
• Foreign exchange exposure management • The treasury function consists of the treasurer and four
FTEs. Additionally, six credit and collections and two risk
• Risk management (insurance)*
management FTEs all report to the treasurer.
• Stock buyback program*
• Stock option administration*
* Not in scope of this review
5
7
DETAILED ISSUES AND OBSERVATIONS (1/10)
General Controls
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Polices and Procedures: The cash investment policy • Develop a current and comprehensive set of • List responsible parties.
does not address authorizations and approval limits for treasury department policies and procedures • Identify the estimated completion
1 investments. In addition, the foreign exchange hedging
and electronic funds transfer policies have not been
and obtain appropriate approval from the
board of directors or committee of the board.
date or month/quarter.
documented. • Include a need for immediate
Written policies for key treasury functions are action or list as “completed” if
The cash investment policy has been updated and approved extremely beneficial and critical to optimizing corrected before report issuance.
by the board; however, the policy does not establish controls and risk awareness. Policies
authorizations and approval limits for investment activities communicate the objectives and importance
and is not supported by documented procedures defining of key functions, provide a framework for
processes, authorities, limits and monitoring controls. actions consistent with the stated objectives,
A written foreign exchange hedging policy has not been and establish controls to minimize risks. To
developed. An FX hedging policy is needed, which clearly be most effective, they should be supported
articulates management’s objectives and sets the tone for by written procedures containing sufficient
treasury’s evolving processes and procedures in this area. detail to efficiently transfer knowledge of
(See additional FX issues and recommendations on Pages applicable processes, control activities,
59 – 61.) forms, systems, reports and communication.
Once established and approved, appropriate
A written electronic funds transfer policy (and supporting policy and procedure maintenance,
procedures) has not been documented. Employees recertification, and distribution processes
authorized to initiate, approve, and release wire transfers and should be implemented to ensure that they
ACH transactions, and the dollar amounts related to their remain current and are accessible to and
authorization levels are not documented and periodically understood by appropriate personnel.
compared to users’ system functionality. Protocols for
handling deviations from the use of the company’s standard Further, the authorization and coordination of
EFT request form are also needed. personnel between company and banking
vendor partners, including transaction
Business Impact: execution and other critical controls, is
• Policies and procedures are inconsistently understood paramount to preventing unauthorized
and applied. transactions.
• Process knowledge is lost due to employee absence or
turnover.
58
Cash Management
Responsible Party
and Resolution Date
Cash Forecasting: Cash forecasting is not performed • Evaluate the potential yield, decision-making • List responsible parties.
because cash requirements are only calculated one day benefits, and improved cash needs/uses • Identify the estimated completion
2 in advance.
The treasury staff prepares a same-day cash position and
matching.
• Develop a process and report to compile
• Include a need for immediate
forecasts following day wire transfer settlements. In addition, short, medium- and long-term forecasts. action or list as “completed” if
accounting prepares a quarterly balance sheet and income • Coordinate analysis with the treasurer, CFO corrected before report issuance.
statement forecast, which is used by treasury to anticipate and CEO on strategic investing/borrowing
future cash positions. initiatives. Discuss additional opportunities
Currently, treasury and the CFO do not view the development with bank relationship personnel to determine
of a formal cash forecasting model as an urgent matter. ongoing strategic analysis.
Nevertheless, short, medium- and long-term cash forecasts
could enable treasury to invest cash more strategically.
Business Impact:
• Strategic investment/borrowing decisions to maximize
return and limit costs can’t be made. (See Item No. 3.)
59
Cash Management
Responsible Party
and Resolution Date
Bank Accounts and Services: Effective use of control • Review the benefit of implementing CDA and • List responsible parties.
disbursement accounts (CDA) and positive pay services confirmation payments on all disbursement • Identify the estimated completion
3 should be continuously reviewed for potential cost
savings and increased efficiencies.
accounts versus the cost of service.
• If cost-justified, eliminate the ZBA cushion
CDA services are used for the company’s AP account; when determining the daily cash position action or list as “completed” if
however, they are not used for the company payroll and following implementation of CDA. (See Issue corrected before report issuance.
several other zero-balance accounts. To compensate, a No. 2).
significant “cushion” ($XX,XXXX-XX,XXX) is left in the Bank
A concentration account to cover unforeseen check
clearings. The cushion funds are set up to sweep into an
overnight money market fund, and although the foregone
interest income currently does not justify the cost of CDA
services, this situation could change and should be
monitored.
Confirmation payment is used exclusively on the main AP
account. Confirmation payment should be considered for all
check disbursement accounts as it protects the company
from unauthorized payment clearings, including fraudulent
items and altered amounts on valid checks and is generally
low cost.
Business Impact:
• Fraud exposure increases.
• The ability to fund disbursements exactly decreases.
• Cash is used inefficiently.
60
Disbursements
Responsible Party
and Resolution Date
Electronic Payments: Low volumes of payables are • Establish ACH as the preferred method of • List responsible parties.
executed using electronic payments, specifically ACH, in payment. • Identify the estimated completion
4 place of checks and wires.
Organizations are strategically migrating towards electronic
payments, specifically ACH, from checks and wires in order action or list as “completed” if
to reduce processing and bank costs. corrected before report issuance.
On average, the company processes approximately X,XXX
checks, XXX wire transfers and XX – XX ACH transactions
per month. There is approximately a $XX savings for utilizing
ACH instead of a wire transfer and nearly $XX savings when
using ACH in place of traditional checks. Assuming half of the
wire transfers and checks could be converted to ACH
transactions, the cost savings in service fees per year could
be around $XX,XXX per year.
In addition to the cost savings, ACH payments simplify the
payment and reconciliation processes and minimize
exposure to fraud.
Routine repetitive transactions are primary targets for
conversion to ACH pre-approved transaction processing.
Business Impact:
• Unnecessary substantial bank fees occur.
• Time and labor cost is associated with check processing
(authorizations and reconciliation).
• Fraud exposure increases.
61
Disbursements
Responsible Party
and Resolution Date
Standard Form Templates: The use of nonstandard • Develop formal procedures to sometimes • List responsible parties.
electronic funds transfer forms should be limited for pre-screen and approve nonstandard • Identify the estimated completion
5 exceptions.
(Company) has a standard wire request form, but treasury
templates.
• Enforce using approved templates and
also processes wire transfer requests documented on ensure that all business unit requesting action or list as “completed” if
nonstandard forms. The use of nonstandard forms increases parties are notified, trained and managed for corrected before report issuance.
the chance for detail oversight or manual error in approving policy and procedure compliance.
and executing requests and should be limited to approved • Verify that OFAC compliance procedures are
exceptions. operating effectively and determine if
Business Impact: modifications to treasury processes impact
• Time is used inefficiently due to researching proper compliance efforts.
requestors and approvals or seeking missing information.
• Fraud or OFAC compliance issues may increase.
Repetitive Wires: The wire transfer/ACH repetitive • Segregate the authority to approve payment • List responsible parties.
template setup and change approval process should be instructions, including instructions to set up
6 segregated. and change repetitive wire/ACH templates,
• Identify the estimated completion
The senior treasurer initiates instructions to set up or change from the authority to approve and send
wires or ACH transactions. • Include a need for immediate
repetitive wire transfer/ACH templates (e.g., hedging action or list as “completed” if
settlements, investment settlements) and is typically the • Develop and maintain a segregation of corrected before report issuance.
person who approves transactions using the repetitive duties matrix that details authority, initiation,
templates. Repetitive wire/ACH templates should be approval, execution, recording and release
approved independently of the person who approves and duties, including manual and system
releases outgoing wires using the templates. processing (access/application functions).
Business Impact:
• Duties are segregated improperly, which could lead to
inappropriate activities.
• Fraudulent exposure increases.
62
Disbursements
Responsible Party
and Resolution Date
Disbursement Procedures and Signature Lists: A list of • Develop and maintain written procedures and • List responsible parties.
specimen signatures and approval limits is not a specimen signature list of authorized • Identify the estimated completion
7 maintained in treasury to verify proper authorization of
wire transfer, ACH and special check requests. Overall,
approvals for use in the disbursement
request verification process.
disbursement procedures are not documented. Checks • Include a need for immediate
• Develop training and communication of action or list as “completed” if
held overnight for pickup are not adequately updated procedures to ensure that personnel
safeguarded. corrected before report issuance.
understand and comply with procedures.
Disbursement procedures are established, but they are not • Store “held-for-pickup” checks in a restricted
documented. Documented procedures outlining acceptable and secure area.
payment request practices (e.g., forms, information and
approvals) should be developed. The procedures should • Verify that authority and related segregation
include verification standards and require usage of current of duties controls are in place to minimize
approval authority lists, containing printed names, limits and fraud opportunities.
specimen signatures of people from whom treasury can
accept wire transfer, ACH and special check requests.
Check issuance and related procedures should address
balancing (e.g., issued checks to source files or documents),
mailing, special handling, safeguarding check stock and
signed checks held overnight, voids, stop pays, and positive
pay exception items. For example, signed checks designated
as “held for pickup” are kept in a locked drawer in the
corporate receptionist area. These checks should be stored
overnight in a locked facility that is in a secure area.
Business Impact:
• Policies and procedures are inconsistently applied and
understood.
• Process knowledge are lost due to employee turnover.
• Fraud exposure increases, and transactions are
unauthorized.
63
Disbursements
Responsible Party
and Resolution Date
Contingency Planning: A contingency plan is not in place • Develop a contingency plan to efficiently • List responsible parties.
to generate signed checks if the main printers goes out produce and sign checks in the event the • Identify the estimated completion
8 of service for an extended time period.
(Company) has one specially configured printer connected to
main printer is out of service.
• Establish adequate chain-of-command
Oracle, which treasury uses to create around 1200 signed signing authorities and dual signature release action or list as “completed” if
checks per week from blank paper stock. A backup printer or procedures to ensure contingency plans corrected before report issuance.
contingency plan is not in place to avoid vendor check prepare for check-signer absence.
payment disruptions if the existing printer malfunctions for an
extended time period.
Business Impact:
• Payments are delayed, and vendor relationships are
strained.
• Costs to use alternate payment methods (e.g., wires)
increases.
• Some state laws require terminated employee payment
requirements that may include penalties for
noncompliance in the event of automated check
processing problems.
64
Foreign Exchange
Responsible Party
and Resolution Date
Foreign Exchange (FX) Policies and Procedures: FX • Develop FX policies and procedures, which • List responsible parties.
9 policies and procedures and companywide training are
needed to communicate roles, responsibilities,
outline the company’s hedging strategy and
objectives and offer sufficient guidance for
dependencies and impacts. Currently, the company users to understand and comply with the
experiences significant foreign exchange losses policies. • Include a need for immediate
resulting from inconsistent intercompany activities. action or list as “completed” if
• Conduct companywide FX hedging and corrected before report issuance.
A companywide foreign exchange policy has not been accounting training to ensure that all affected
developed and distributed to appropriate corporate and personnel understand their roles,
subsidiary level personnel. A written FX policy is needed, responsibilities, activities and
which clearly states the rationale and implications of interdependencies.
noncompliance with the policy and includes examples of • Monitor compliance and conduct additional
accepted and prohibited foreign exchange activities at all targeted training, as situations dictate.
levels (e.g., subsidiary, corporate). Minimally, these examples
should include intercompany, transaction and translation • Evaluate incorporating a program of foreign
activities. The intercompany section should clearly stipulate cash forecasting (see No. 2) and delayed
that intercompany transactions must be denominated in the repatriation/pooling of foreign currency or
same currency between entities and provide guidance on foreign bank pooling to offset FX currency
steps to perform. This ensures that intercompany requirements.
transactions always net to zero by currency. Currently, the
company experiences significant foreign exchange losses
resulting from inconsistent intercompany activities.
A companywide FX policy and training are imperative
because inconsistent processes are resulting in
unpredictable gains and losses for the company.
Business Impact:
• FX gains and losses are unpredictable.
• Financial plans can’t be achieved.
65
Foreign Exchange
Responsible Party
and Resolution Date
FX Process Segregation of Duties: The activities of • Document specific duties of each employee • List responsible parties.
10 initiation, matching, confirming and recording FX
hedging transactions are not documented and are
involved in hedging activities.
• Ensure that the initiation, matching and
performed by a single individual. confirmation/settlement activities are • Include a need for immediate
One treasury analyst performs the entire process of performed by different personnel. action or list as “completed” if
executing FX hedging transactions, matching trades and • Assign key backup personnel to assist in the corrected before report issuance.
settling hedged positions. This same employee proposes hedging process, as well as create a plan of
journal entries to record hedging gains and losses and action in absence of key personnel.
prepares FX hedging analysis reports for management.
Overly concentrating on duties reduces control effectiveness
and could lead to performance issues if the person leaves or
is absent for an extended time period. FX hedging process
backup personnel should be identified to help alleviate some
segregation of duties issues. These duties should be
documented per a formal company policy.
Business Impact:
• Duties are segregated improperly, which could lead to
inappropriate activities.
• Fraudulent exposure may increase.
• Hedging opportunities can’t be obtained if key personnel
are absent.
66
Foreign Exchange
Responsible Party
and Resolution Date
FX Hedging Best Practices: Subsidiary FX hedging best • Analyze current subsidiary performance to • List responsible parties.
practices should be assimilated and implemented identify best practices.
11 companywide, as applicable. • Develop a benchmark or diagnostic tool.
Certain company subsidiaries consistently perform well in the
area of managing foreign exchange hedging gains and • Implement best practices to applicable • Include a need for immediate
losses. A process should be developed to routinely collect subsidiaries. action or list as “completed” if
information regarding what the well-performing subsidiaries, corrected before report issuance.
such as Japan, are doing. The “best practices” should be
incorporated into a benchmark or diagnostic tool and used to
improve the foreign exchange hedging performance of all
company subsidiaries.
Business Impact:
• Losses resulting from improved subsidiary foreign
exchange performance decrease.
Bank Account Structure: Bank account structure and • Establish a formal procedure for regularly • List responsible parties.
services should be documented and reviewed for evaluating bank accounts and service fees to • Identify the estimated completion
12 improved process and cost savings.
Although company enforces centralized control over bank
determine whether the accounts are still
necessary, or the fees can be negotiated
lower. Inactive accounts should be closed in • Include a need for immediate
accounts, treasury does not document and periodically
order to reduce banking fees and internal action or list as “completed” if
review the bank structure and services. The number of bank
costs. corrected before report issuance.
accounts should be evaluated regularly in order to
continuously improve the control and management of cash.
Additionally, each account requires overhead in the form of
bank costs, funding costs, and costs to reconcile and
monitor.
Business Impact:
• Fraudulent activity may increase.
• Bank costs may increase.
• Bank services may be duplicated.
• Control may be lost.
• Cash may be managed inefficiently.
67
APPENDIX I: INTERNAL CONTROL ASSESSMENT (1/2)
The matrix below and on the following pages lists process controls that should be present within a well-controlled business environment.
An evaluation of the company’s process is noted in each instance. Controls were evaluated as follows:
Good Controls: Controls are present to mitigate process/business risk and are operating effectively and efficiently.
Moderate Controls: Controls are present to mitigate most process/business risk, but management should evaluate
 opportunities to enhance existing controls.
Limited Controls: Existing controls may not mitigate process/business risk, and management should consider implementing a
stronger control structure.
Where possible improvement can be made in the control structure, a reference has been made to the Issues and Observations
sections where management’s change implementation plan is described along with the responsible party and estimated
implementation timing.
Issue
Manage Cash Flow Evaluation
Reference No.
Ensure that all debt and investment transactions are accurately processed and
1.
recorded timely.  8
Ensure that investing, borrowing, disbursement and other financial transactions are
2.
properly authorized.  5, 7 and 10
Maintain lines of credit that are adequate to meet recurring and unexpected funding
3.
requirements.
4. Protect the integrity of systems, databases and records. 
5. Safeguard cash, investments and other financial assets and segregate duties.  10
68
APPENDIX I: INTERNAL CONTROL ASSESSMENT (2/2)
Issue
Manage Financial Risk Evaluation
Reference No.
Management segregates incompatible duties and protects integrity of application
1.
systems, key records and documents used to process transactions.  10
2. Risk management activity and derivatives transactions are properly authorized. 11


3. All foreign exposure transactions are accurately processed and reported.
4. Exposures are frequently measured and evaluated.

5. A process for financial risk monitoring and control exists.

Good Controls
Moderate Controls Limited Controls
69
REPORT: SAMPLE 4
EXECUTIVE SUMMARY
In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange hedging functions
are less than adequate. The following primary opportunities for improvement have been identified through interviews and process observations
with treasury personnel and limited transaction testing.
• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange, treasury
accounting, subsidiary procedure-related policies). Formal, written cash management or treasury accounting policies do not exist.
• Cash management operations at the subsidiary corporation could be combined with Company ABC corporate treasury.
− Excess cash balances at the subsidiary (occasionally as high as $XXX million) are not automatically transferred to Company ABC for
investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were not
reconciled to broker statements or treasury records.
investments were recorded into the wrong general ledger account (no adverse financial effect). In each case, the daily transaction
report prepared by treasury was incorrect. Adjustments were made to journal entries to reverse each error prior to our identifying the
error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated and
include former Company ABC employees. These employees are, technically, still allowed to initiate transactions on behalf of
Company ABC.
• Foreign exchange exposure hedges are not formally approved. The policy requires written documentation from the chief financial officer
(CFO) of all hedge contracts.
• Management reporting in all areas could be improved (specifically, investments and foreign exchange hedging). Treasury currently
submits single-page documents to executive management with little detail of key treasury measures (e.g., yield, portfolio composition,
foreign exchange exposures, etc.).
• Reconciliations of the AA bank account should be reviewed by the treasury manager to ensure that they have been properly prepared.
This review should be documented.
71
Design
EXECUTIVE SUMMARY option
In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange
hedging functions are less than adequate. The following primary opportunities for improvement have been identified through
interviews and process observations with treasury personnel and limited transaction testing.
• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange,
treasury accounting, subsidiary procedure-related policies). Formal, written cash management or treasury accounting policies
do not exist.
• Cash management operations at the subsidiary corporation could be combined with Company ABC corporate treasury.
− Excess cash balances at the subsidiary (occasionally as high as $XXX million) are not automatically transferred to Company
ABC for investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were
not reconciled to broker statements or treasury records.
investments were recorded into the wrong general ledger account (no adverse financial effect). In each case, the daily
transaction report prepared by treasury was incorrect. Adjustments were made to journal entries to reverse each error prior
to our identifying the error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated
and include former Company ABC employees. These employees are, technically, still allowed to initiate transactions on
behalf of Company ABC.
• Foreign exchange exposure hedges are not formally approved. The policy requires written documentation from the chief
financial officer (CFO) of all hedge contracts.
• Management reporting in all areas could be improved (specifically, investments and foreign exchange hedging). Treasury
currently submits single-page documents to executive management with little detail of key treasury measures (e.g., yield,
portfolio composition, foreign exchange exposures, etc.).
• Reconciliations of the AA bank account should be reviewed by the treasury manager to ensure that they have been properly
prepared. This review should be documented.
72
OBJECTIVE AND SCOPE
Objectives:
Scope:

• The period of review was for (Insert Date).
• This project did not include a review of the strategic alliance/partnership investments
managed outside of corporate treasury.
− Cash Management
− Wire Transfers*
− Investments*
− Foreign Exchange Exposure Management*
* Limited detailed testing was performed.
73
Design
OBJECTIVE AND SCOPE option
Objective

• The period of review was for (Insert Date).
• This project did not include a review of the strategic alliance/partnership investments
managed outside of corporate treasury.
− Cash Management
− Wire Transfers*
Scope − Investments*
− Foreign Exchange Exposure Management*
* Limited detailed testing was performed.
74
SUMMARY OF PROCEDURES PERFORMED (1/2)
Available Company ABC corporate treasury policies and procedures related to cash management, investing and foreign
1 exchange exposure management were obtained and reviewed.
2 Key treasury and accounting personnel were interviewed.
3 Performance of key treasury processes was observed.
4 Detailed testing of outgoing wire transfers and investments was performed.
5 Domestic and international cash and investment account reconciliations were reviewed.
6 Investment manager statements were reviewed.
75
Design
SUMMARY OF PROCEDURES PERFORMED (1/2) option
Available Company ABC

corporate treasury policies and
procedures related to cash
Key treasury and accounting Performance of key treasury
management, investing and
personnel were interviewed. processes was observed.
foreign exchange exposure
management were obtained and
reviewed.
01 02 03
Detailed testing of outgoing wire Domestic and international cash

Investment manager statements
transfers and investments was and investment account
were reviewed.
performed. reconciliations were reviewed.
04 05 06
76
SUMMARY OF PROCEDURES PERFORMED (2/2)
7 Internal management reports were reviewed.
8 The calculation of AA exposures was analyzed for Q2-YY.
9 Foreign exchange hedging forwards and options were analyzed for Q2-YY.
10 The overall internal control environment was evaluated.
11 Company ABC’s practices were compared with best practices for selected treasury operations.
12 Observations and management action plans were reported on.
77
Design
SUMMARY OF PROCEDURES PERFORMED (2/2) option
Foreign exchange hedging

Internal management reports The calculation of AA exposures
forwards and options were
were reviewed. was analyzed for Q2-YY.
analyzed for Q2-YY.
01 02 03
Company ABC’s practices were

The overall internal control Observations and management
compared with best practices for
environment was evaluated. action plans were reported on.
selected treasury operations.
04 05 06
78
ACKNOWLEDGMENTS
We would like to thank all Company ABC employees that assisted us in our work during this project. We received input and assistance from the
following personnel:
Corporate Treasury
(Insert Names and Titles)
Accounting
(Insert Names and Titles)
Your help is key to the success of this project!
79
GENERAL BACKGROUND
During the fiscal XXXX/XXXY internal audit planning process, executive management identified treasury operations for review in
the fiscal XXXX/XXXY audit plan. Treasury operations were last reviewed in XXXY by audit services.
Corporate treasury is responsible for the following functions for both Company ABC and Company ABC International.
Cash management and short-term investing include:

• Bank account management, including bank lines of credit and other types of financing as required by Company ABC
• Foreign exchange exposure management
• Risk management, including coordinating insurance coverage
• Credit and collections
Treasury personnel include one full-time treasury manager and one part-time treasury analyst.
80
TRANSFERS (1/3)
As of XXXX, Company ABC had worldwide cash and investments of approximately $XYZ million (see graph on next page).
• Treasury personnel perform cash management functions for both Company ABC incorporated and international entities.
Company ABC subsidiaries perform cash management operations independent from corporate treasury. Subsidiaries’ excess
cash is transferred to corporate treasury (at corporate’s request) for investment.
• Treasury maintains an AA account with Bank X for AA accounts receivable and accounts payable activity. AA account
balances are not invested due to low Country X interest rates. Foreign exchange exposure in the AA account is hedged (see
FX background).
• Cash management activity is monitored daily.
The Company ABC treasury department currently utilizes XX for all incoming and outgoing wire transactions.
Treasury personnel hold releasing and approval capabilities within the XX system. Each individual may perform only one of these
functions for each transaction.
In the case of a system failure, alternate wire transfer procedures have been established. Wire transfer information may be
directly called into the appropriate bank. A safe wire card is utilized by the releasing party to ensure that only authorized
personnel are transferring company funds. Once released, the wire information is confirmed by another authorized individual with
system approval capabilities.
81
TRANSFERS (2/3)
2%
15%
22%
XX Company
YY Company
ZZ Company
AA Company
Others
16% Short Term Cash
28%
17%
Total Consolidated Cash equals $ XXX million
82
TRANSFERS (3/3)
Wire templates have been established within the XX system. Dual authorization is required for the creation of such templates. In addition,
dual authorization is required for all template changes.
To process a wire, a wire transfer sheet must be signed and approved by certain Company ABC employees, based on the current company
signature authority policy. Exceptions to this rule exist for overnight investments and payroll payments, which do not require such approvals.
Wire information is reconciled monthly to the general ledger by Company ABC’s general accounting department.
The matrix below details the people authorized to initiate and approve wire transfers with their respective processing limits.
Dollar Limits Per Dollar Limits Per User Other Access

User
Transaction Per Day Limitations
ABC Treasury Release equals $XXX

Up to $ X million None
Analyst Approve equals $XXX
Wire Transfer
(Company Y) Release equals $XXX
ABC Treasury
Authorization Matrix Up to $ X million None
Manager Approve equals $XXX
Users and Approval
Limits
AAA Finance Release equals $XXX
Manager Approve equals $XXX
Total Limits Per Release equals $XXX

XYZ Inc. Approve equals $XXX
83
01 Excess cash for both Incorporated and international accounts are invested daily in overnight money market accounts held
with Bank X. Excess cash from money market accounts is invested short-term with external money managers (BB, CC and
DD).
02 Company ABC’s current investment policy is conservative; however, a more aggressive policy has been developed and
submitted to the board for approval. All money managers are required to adhere to this policy in all investments. All short-
term investments are made through money managers.
03 All current short-term investments have a maturity less than four months.
• Of the $XXX million in cash, approximately XX% is held in short-term investments. The remaining XX% is short-term cash,
consisting primarily of the Bank X AA cash and overnight money market accounts.
• The following page displays the short-term investment portfolio by instrument type.
04 Maturing investments are automatically transferred into a money market account held by the managing institution. From
there, the money is either rolled over into another short-term investment or wired back to Company ABC.
05 Investments are recorded at cost. Cost-to-market value adjustments are minimal due to the short duration of investments.
06 Company ABC participates in approximately 10 strategic alliances/partnerships. In some cases, dollar investments have
been made. These alliances/partnerships are managed at the executive level and are independent of corporate treasury.
84
Design
BACKGROUND: INVESTMENTS (1/2) option
Excess cash for both Incorporated and international accounts are invested daily in overnight money market accounts held with Bank X.
1
Excess cash from money market accounts is invested short-term with external money managers (BB, CC and DD).
Company ABC’s current investment policy is conservative; however, a more aggressive policy has been developed and submitted to the
2 board for approval. All money managers are required to adhere to this policy in all investments. All short-term investments are made
through money managers.
All current short-term investments have a maturity less than four months.
• Of the $XXX million in cash, approximately XX% is held in short-term investments. The remaining XX% is short-term cash, consisting
3
primarily of the Bank X AA cash and overnight money market accounts.
• The following page displays the short-term investment portfolio by instrument type.
Maturing investments are automatically transferred into a money market account held by the managing institution. From there, the
4
money is either rolled over into another short-term investment or wired back to Company ABC.
5 Investments are recorded at cost. Cost-to-market value adjustments are minimal due to the short duration of investments.
Company ABC participates in approximately 10 strategic alliances/partnerships. In some cases, dollar investments have been made.
6
These alliances/partnerships are managed at the executive level and are independent of corporate treasury.
85
Short-Term Investment Portfolio

by Instrument Type
as of XXXX
(in millions of dollars)
Short-term portfolio includes Government Agencies Y%

Commercial Papers and Others X%
(Insert Financial Institutions)
Average combined taxable
equivalent yield as of XXXX is
approximately X.X%
Commercial Papers & Others

Government Agencies
Government Treasuries
Government Treasuries XY%
86
BACKGROUND: FX
1 Company ABC’s foreign currency exposure management program is

primarily focused on managing its transaction exposures.
2 Transaction exposure results occur mainly from nonfunctional currency AA

denominated receivables and payables.
Insert Graph
3 AA foreign exchange forward contracts and AA put and call options are the
primary hedging instruments utilized.
4 Treasury has concluded that no other significant foreign currency exposures

exist at Company ABC that require hedging.
87
ACTION MATRIX
(Insert Action Matrix Pages Here)
88
BEST PRACTICES
(Insert Leading Practice Pages Here)
89
APPENDIX: FX BACKGROUND/STRATEGY (1/2)
The treasury manager receives biweekly information regarding forecasted intercompany AA activity from Company ABC, its
xx subsidiary. This information is utilized by the treasury manager to determine Company ABC ’s expected monthly AA cash
01 position and net AA balance sheet exposures for each month through the end of the fiscal year. If the AA cash forecast
indicates months in which excess AA will be available, the treasury manager will sell AA forward to reduce this foreign
currency exposure.
The decision on whether to sell any excess AA forward is made by the treasury manager based on his analysis of the
02 current foreign exchange market conditions, particularly the current trend in the AA exchange rate in relation to the most
recent accounting AA exchange rate and his level of confidence in the AA forecast.
Company ABC is typically long AA.

• If the AA has been weakening against the dollar and the treasury manager expects this trend to continue, he will consider
selling any excess AA forward (thus reducing AA exposure and minimizing expected translation losses).
03 • Additionally, the biweekly AA exposure update performed by the treasury manager might result in changes in the
forecasted AA cash position. Such changes in the forecast, depending on their significance, can result in additional
forward AA sales to keep the hedges in line with the adjusted exposures.
90
APPENDIX: FX BACKGROUND/STRATEGY (2/2)
AA foreign exchange options are utilized to hedge any remaining net unhedged AA exposures. The strategy utilized by the
treasury manager in this area involves the purchase of an AA put option (maturity date of quarter-end, strike price equal to
current AA exchange rate and option amount equal to remaining unhedged quarter end AA exposure). While the treasury
manager purchases this AA put option, he will also sell an AA call option that has the same maturity date and strike price.
04 The amount of AA covered by this written call option is set at the amount necessary so that the option premium received by
Company ABC from the sale of this call option exactly offsets the option premium paid by Company ABC on the purchase of
the AA put option. Additionally, according to the treasury manager, Company ABC’s unhedged AA exposure will always
remain in excess of the AA covered by the written call option (i.e., the written option is “covered” in that Company ABC
maintains sufficient AA positions).
AA Fluctuation
• The purchased AA put option protects Company ABC in the event of a weakening AA. In this scenario, translation of the
AA balance sheet exposure will result in a remeasurement loss. The purchased AA put option will increase in value,
resulting in a gain that will offset the remeasurement loss. The written AA call option will expire worthless.
05 • In the event of a strengthening AA, remeasurement of the AA balance sheet exposure will result in a gain. The purchased
AA put option will expire worthless. The written AA call option, however, will be exercised by the counterparty, resulting in
a loss for Company ABC on the option exercise. This loss incurred from the exercise of the written call option will be
offset by the remeasurement gain on the AA exposure (the AA exposure remeasured should exceed the AA covered by
the written call option, as described above, resulting in a net gain).
91
REPORT: SAMPLE 5
PAYMENT AUTHORIZATION AND
RELEASE PROCESS PROPOSED
IMPLEMENTATION PROCEDURES
PAYMENT PROCESSING AND AUTHORIZATION:
OVERVIEW OF CURRENT AND FUTURE-STATE KEY
RESPONSIBILITIES
Responsible Party: Current Responsible Party:
Transaction Type Activity
State Proposed Future State
Payment Proposal Run Accounts Payable Treasury Payments
Check Payment Approval Treasury Cash Operations Treasury Operations
Payment Execution Accounts Payable Treasury Payments
Automated ACH Payment Approval Treasury Cash Operations Treasury Operations
Automated Wires Payment Approval Treasury Cash Operations Treasury Operations
Payment Processing in JPMA Accounts Payable Treasury Payments
Payment Approval Treasury Cash Operations Treasury Operations
Manual ACH
Payment Execution Accounts Payable Treasury Cash Operations
Payment Processing in SAP Accounts Payable Accounts Payable
Payment Processing in CRP Accounts Payable Treasury Payments
Payment Approval Treasury Cash Operations Treasury Operations
Manual Wire
Payment Execution Accounts Payable Treasury Cash Operations
Payment Processing in SAP Accounts Payable Accounts Payable
Payment Proposal Run Credit TBD
EFT Payment Approval N/A TBD
Payment Execution Credit TBD
Note: Final EFT results pending EFT process documentation
94
INITIATION OF PAYMENT RELEASE FUNCTION
Initiation of the payment release function by the accounts payable department prevents the treasury function from
Risk performing an independent daily review and analysis of funds disbursement activities, including providing
authorization of all funds disbursed by the company (causing inappropriate segregation of duties).
The treasury payments group will assume responsibility for the business activities related to initiating the invoice
Proposed
payment run and authorizing disbursements for all payment types. For check, ACH and wire funds, this activity is
Implementation
performed through transaction F110 in SAP. For manual ACH and manual wire funds, the initiation of payments is
Procedure through separate, third-party-provided banking applications.
A new treasury payments group will be created within the treasury department and will include the positions of a
payment and debt analyst and a payment process supervisor. The stated group will report functionally to the
treasurer and will perform the proposed implementation procedures stated above. This new function will provide
treasury with the assurance that all significant payments have been forecasted by the business units and have
been approved prior to disbursement. In turn, treasury will have the capability to determine whether funds are
readily available for expected future payments.
Treasury payments will run the F110 proposal transaction in SAP for all check, ACH and wire transactions being
Action Plan disbursed on the current day. For any unresolved payment issues, the payment process supervisor will manually
block the payment from the proposal list prior to the execution and release of funds. After manual ACH and manual
wire transactions have been authorized by the treasury payment authorization analyst, treasury payments will log
in, initiate, and enter manual ACH and manual wire payments through the designated banking system. A custom
report will be created by treasury payments for all manual ACH and manual wire payments to be sent to treasury
cash operations for approval and release. The payment and debt analyst will assist the treasury payment
authorization analyst to resolve any payment issues listed on the proposal.
Treasury will implement a procedure representing this change in ownership for the initiation of payment release.
95
AUTHORIZATION OF PAYMENTS
The treasury department could potentially release funds for payments that have not been appropriately forecasted
by the business units and/or have not been authorized by the appropriate personnel. Forecasted payments
Risk
emailed sporadically to treasury with no commonality in information prevent treasury from appropriately managing
and approving their daily cash flow forecast.
Proposed The treasury payment authorization analyst (TPAA) will analyze and authorize payments to be executed by
Implementation treasury payments. This will ensure that payments have been forecasted and approved by the appropriate
Procedure personnel according to threshold limits and the systems authority.
The TPAA position will be created under the manager treasury operations and will be responsible for aggregating
data from the cash flow forecasting analyst and data from the treasury payments analyst to determine payments
are accurate and complete.
The TPAA will receive the payment proposal from the treasury payments group and analyze the information
against the cash flow forecast. Information from the proposal will be filtered for designated criteria (including a
stated threshold limit, prepayments and potential multiple payments) to create a payment approval report. The
report will be analyzed against the cash flow forecast to authorize the release of payments. The TPAA will ensure
Action Plan that payments listed on the payment approval report are forecasted at least five days prior to the release of
payment. Business units will only be able to update forecasted information for Days 6-10 within a X% deviation of
the original forecasted amount.
The manager of treasury operations will review and approve the analysis of payments. For check, ACH and wire
payments, treasury payments will be notified of the approval. For manual ACH and manual wire payments,
treasury cash operations will be notified of the approval. For any discrepancies, the TPAA will research and
resolve issues and contact BUs for follow-up when necessary.
Treasury will implement a procedure representing this change of the payment authorization process.
96
RELEASE OF PAYMENTS
The payment release function by the accounts payable department prevents treasury from having complete
Risk
control and authorization of all funds disbursed by the company daily.
The treasury payments group will acquire the system function of releasing all approved check, ACH and wire
Proposed
payments originated through transaction F110. The treasury cash operations group will assume the function of
Implementation
releasing all approved manual ACH and manual wire payments through separate third-party-provided banking
Procedure applications.
The new treasury payments group will be responsible for the release of all check, ACH and wire payments through
the system transaction F110. After payments have been analyzed and authorized by the TPAA, the treasury
payments group will execute the payment run, which automatically releases transactions set to be paid in F110.
For all check payments greater than $X, Treasury payments will obtain a counter-signature and disburse all
checks to the mailroom and receivers. SAP will send an automatic notification to the current bank used for
Action Plan processing ACH payments. This report is obtained by the payment process supervisor to ensure that funding to
the bank reflects payments disbursed from the F110 report.
The treasury cash operations group will acquire the function to release manual ACH and manual wire payments
through separate banking systems. Manual ACH and manual wire payments are only released after the TPAA has
determined that payments are complete, accurate and ready for disbursement.
Treasury will implement a procedure representing this change in ownership of the payment release process.
97
SPECIFIC PROFILES OF SELECTED PAYMENTS (1/2)
Specific profiles to the payment process, including rush payments, prepayments and multiple payments, are all
Risk potential issues that digress from treasury forecast and planned investment strategies. Releasing funds for these
payment anomalies could potentially cause a deviation in cash flow forecasting and disbursements.
The treasurer will have the ultimate approval for releasing funds required for rush payments. Treasury payments
Proposed will be responsible for ensuring that all prepayments have appropriate BU approval with final approval from the
Implementation treasurer and have been forecasted at least five days prior to the payment due date. The TPAA will also run a
Procedure multiple payment report from SAP to identify any potential multiple payments and follow up as necessary before
cash is released for payment.
Rush Payments: Policies will be documented to establish that a payment is considered a rush payment if it has
not been forecasted at least five days prior to the expected payment date. For Days 6-10, the policy will state that
business units can only update expected transactions within a X% variance of the original forecast.
The TPAA will notify the treasury forecasting analyst if any rush payments have been identified. The treasury
forecasting analyst will be responsible for contacting the BU processor and determining why the payment was not
originally forecasted. If the BU manager and the treasury forecasting analyst agree the payment is considered a
Action Plan rush payment, it will require final approval from the treasurer before being processed for payment.
If the treasurer approves the rush payment and funds are available to make the payment, the payment will be
processed as soon as possible (the same day if the payment run has not been performed or the next possible day
if the payment run has been performed). If the treasurer approves the rush payment but funds are not available,
the treasury cash operations group will obtain necessary funds to process the payment. If the treasurer does not
approve the rush payment, the BU will be notified to schedule the payment on the forecast according to treasury’s
procedure.
98
SPECIFIC PROFILES OF SELECTED PAYMENTS (2/2)
Prepayments: The TPAA will filter the cash flow forecast for all forecasted prepayments and escalate information
and issues to management, if necessary. The BUs will determine the requirements of the prepayment and notify
the BU manager, treasury payments and cash operations, and AP of the required prepayment. If the prepayment is
not forecasted, the treasury forecasting analyst will contact the BU processor to determine if the prepayment is a
rush payment and why the payment was not forecasted according to treasury’s policy. If the prepayment is
considered a rush payment by the BU, it will go through the rush payment process and require the appropriate
approvals before processing. If it is not considered a rush payment, the prepayment will be forecasted according
to treasury’s policy.
Action Plan
Multiple Payments: The TPAA will run a daily multiple payment report to ensure that payments are accurate and
that approvals are obtained for aggregated payments to a vendor above a stated threshold according to treasury’s
policy. Potential multiple payments will be followed up with BUs and put on “suspect” status before payments are
made. The BU will be required to provide the TPAA with the rationale for the multiple payments. If the use of
multiple payments is erroneous, the TPAA will follow up with management for corrective action and log all
instances of multiple payments. The TPAA and the BU will resolve the payment as necessary when multiple
payments are identified before funds are released for payments.
Treasury will implement a procedure representing this control of the payment process.
99
ACCOUNTS PAYABLE: PERFORMANCE OF BANK
RECONCILIATION PROCESS
Risk Inappropriate segregation of duties exists.
Proposed
The bank reconciliation process will transfer to the control of the accounts payable department to keep
Implementation
segregation of duties in balance.
Procedure
The accounts payable department will acquire the task of performing bank reconciliations. Personnel that should
Action Plan
perform the specific functions within this process is determined by accounts payable.
10
0
CASH FLOW FORECASTING
PROCESS PROPOSED
IMPLEMENTATION PROCEDURES
COMPILATION OF TREND AND BUDGET DATA
Scope Proposed Implementation Procedure
The compilation of all relative data will be used to The treasury department is required to know the
create the most accurate master cash flow forecast expected business unit cash flow in a timely manner
database for treasury investment-strategy purposes. and to make investment decisions based on all
The data compiled includes the annual capital and relevant information. A new treasury forecasting
operational expenditure budget (per BU by month set analyst position will be created under the treasury
by management), treasury’s trending data derived cash operations supervisor and the position will be
from one year’s historical actual, budget and responsible for compiling all forecasting data to
forecasted amounts (per BU by day), and a two- create management reports that will provide data to
month trend determined by each BU. allow management to make informed investment and
borrowing decisions.
The treasury forecasting analyst will populate the
master cash flow database per BU by day with the
previous year’s trended data based on actual, budget
and forecasted information. Each BU will determine
the annual budget for capital and operational
expenditures by month and send this information to
the treasury forecasting analyst. Each BU will send
two months of trended information every other (Insert
Day) to the treasury forecasting analyst. All of the
trended, historical and budget information will be
uploaded into one database to be analyzed against
daily current transactions being received and
disbursed.
10
2
COMPILATION OF TREND AND BUDGET DATA
Scope Proposed Implementation Procedure
The compilation of all relative data will be used to create the The treasury department is required to know the expected
most accurate master cash flow forecast database for business unit cash flow in a timely manner and to make
treasury investment-strategy purposes. The data compiled investment decisions based on all relevant information. A
includes the annual capital and operational expenditure new treasury forecasting analyst position will be created
budget (per BU by month set by management), treasury’s under the treasury cash operations supervisor and the
trending data derived from one year’s historical actual, position will be responsible for compiling all forecasting data
budget and forecasted amounts (per BU by day), and a two- to create management reports that will provide data to allow
month trend determined by each BU. management to make informed investment and borrowing
decisions.
The treasury forecasting analyst will populate the master
cash flow database per BU by day with the previous year’s
trended data based on actual, budget and forecasted
information. Each BU will determine the annual budget for
capital and operational expenditures by month and send this
information to the treasury forecasting analyst. Each BU will
send two months of trended information every other (Insert
Day) to the treasury forecasting analyst. All of the trended,
historical and budget information will be uploaded into one
database to be analyzed against daily current transactions
being received and disbursed.
10
3
DETERMINATION OF DAILY CASH POSITION
Proposed Implementation
Risk Action Plan
Procedure
The daily aggregated cash position may not The treasury analyst will determine the daily The treasury analyst under the cash
accurately reflect the current position of cash position based on daily payments and operations supervisor will populate the daily
Company ABC, causing erroneous receipts to make investment and borrowing cash worksheet with check, ACH, wire and
investment and borrowing decisions and/or decisions. The treasury analyst under the payroll amounts to include all relevant
unnecessary use of working capital. cash operations supervisor will populate the information to reflect the current cash
daily cash worksheet with check, ACH, wire position. Including all of these amounts will
and payroll amounts to include all relevant increase the reliability of the data for the
information to reflect the current cash treasurer and the treasury department to
position. make informed decisions. This will ensure
that investment and borrowing decisions will
be based on a daily cash position that will
accurately reflect approved transactions.
The daily cash worksheet will be provided to
the cash operations supervisor to follow up
on discrepancies with the bank and finalize
the daily cash worksheet to be ready to
upload into the master cash flow database.
10
4
Design
DETERMINATION OF DAILY CASH POSITION option
Risk Action Plan
Procedure
The daily aggregated cash position may not The treasury analyst will determine the daily cash The treasury analyst under the cash operations
accurately reflect the current position of position based on daily payments and receipts to supervisor will populate the daily cash worksheet
Company ABC, causing erroneous investment make investment and borrowing decisions. The with check, ACH, wire, and payroll amount to
and borrowing decisions and/or unnecessary use treasury analyst under the cash operations include all relevant information to reflect the
of working capital. supervisor will populate the daily cash worksheet current cash position. Including all of these
with check, ACH, wire and payroll amounts to amounts will increase the reliability of the data for
include all relevant information to reflect the the treasurer and the treasury department to
current cash position. make informed decisions. This will ensure that
investment and borrowing decisions will be based
on a daily cash position that will accurately reflect
approved transactions. The daily cash worksheet
will be provided to the cash operations supervisor
to follow up on discrepancies with the bank and
finalize the daily cash worksheet to be ready to
upload into the master cash flow database.
10
5
INITIATION AND UPDATE OF DAILY CASH FLOW
FORECAST
Risk Action Plan
Procedure
The cash flow forecast may not accurately Each BU will be required to enter the cash Each BU will dedicate a BU analyst to enter
represent the daily activity of disbursements flow forecast every (Insert Day). The and update expected cash flow information
and receipts for all BUs, which would affect forecast should include the expected cash daily for the next 10 business days. Every
daily or future investment strategies and disbursement and receipt amounts for the (Insert Day), the BU analyst will receive an
planning. next 10 business days. Days 1-5 will be a automatic reminder to initiate a forecast
definitive forecast while Days 6-10 will be an reflecting expected cash flow disbursements
approximate forecast. Days 6-10 can only and receipts. The first five business days
be updated within a X% variance of the (Days 1-5) will be a definitive forecast that
original forecasted amount. cannot be changed. The next five business
days (Days 6-10) will represent an
approximate forecast that can be changed
within a X% variance of the original
forecasted amount. If approvals are
necessary for Days 6-10, the BU analyst
must obtain the required approvals before
the update will be recorded on the forecast.
Treasury will implement a policy
representing this procedure and
communicate the change in forecasting
procedures to all BUs.
The BU manager will review and approve
the forecast before noon every (Insert Day)
and send the approved forecast to treasury.
If discrepancies exist on the forecast, the
BU manager will follow up with the BU
analyst to resolve any issues before the
data is sent to treasury for forecasting.
10
6
INITIATION AND UPDATE OF DAILY CASH FLOW Design
option
FORECAST
Risk Action Plan
Procedure
The daily aggregated cash position may not The treasury analyst will determine the daily cash Each BU will dedicate a BU analyst to enter and
accurately reflect the current position of position based on daily payments and receipts to update expected cash flow information daily for
Company ABC, causing erroneous investment make investment and borrowing decisions. The the next 10 business days. Every (Insert Day),
and borrowing decisions and/or unnecessary use treasury analyst under the cash operations the BU analyst will receive an automatic reminder
of working capital. supervisor will populate the daily cash worksheet to initiate a forecast reflecting expected cash flow
with check, ACH, wire and payroll amounts to disbursements and receipts. The first five
include all relevant information to reflect the business days (Days 1-5) will be a definitive
current cash position. forecast that cannot be changed. The next five
business days (Days 6-10) will represent an
approximate forecast that can be changed within
a X% variance of the original forecasted amount.
If approvals are necessary for Days 6-10, the BU
analyst must obtain the required approvals before
the update will be recorded on the forecast.
Treasury will implement a policy representing this
procedure and communicate the change in
forecasting procedures to all BUs.
The BU manager will review and approve the
forecast before noon every (Insert Day) and send
the approved forecast to treasury. If
discrepancies exist on the forecast, the BU
manager will follow up with the BU analyst to
resolve any issues before the data is sent to
treasury for forecasting.
10
7
COMPILATION OF MASTER CASH FLOW DATABASE
(1/2)
Risk Action Plan
Procedure
The cash flow forecast may not include all Treasury cash operations will compile all The treasury forecasting analyst position will
current and relevant information to ensure cash flow information to create an up-to- be created under the cash operations
that complete and accurate data is available date and accurate forecast. The master supervisor and will be required to compile
to provide information for making investment cash flow database will include treasury’s and analyze all data from the master cash
and borrowing decisions. It will also aid in trended data, the BU’s trended data, the BU flow database. The treasury forecasting
determining that accurate and timely budget and the most recent forecast analyst will analyze forecasted information
payments are disbursed and that funds are submitted by each BU. From the master to ensure that all expected payments are
received. Management reports could cash flow database, management reports authorized and valid.
potentially not accurately reflect Company will be created for review, approval and
A batch report with the upcoming 10-day
ABC’s current cash position. decision-making. Treasury cash operations
forecast will be automatically sent to
will run and review a change report to
treasury at noon every (Insert Day). All
identify updates made to the initial forecast.
information will be aggregated in the
database to create a master cash flow
database (including treasury’s trended data,
each BU’s trended data, the BU budget and
the most recent forecast submitted by each
BU). Actual data that has been received or
paid will be updated by the treasury
forecasting analyst throughout the day.
The master cash flow database will be used
to create management reports, including the
daily variance report, investment/borrowing
position report, weekly variance report, BU
cash flow forecast report – (Insert Day)
noon, and cash flow management summary
report.
10
8
Design
option
(1/2)
Risk Action Plan
Procedure
The cash flow forecast may not include all current Treasury cash operations will compile all cash The treasury forecasting analyst position will be
and relevant information to ensure that complete flow information to create an up-to-date and created under the cash operations supervisor
and accurate data is available to provide accurate forecast. The master cash flow and will be required to compile and analyze all
information for making investment and borrowing database will include treasury’s trended data, the data from the master cash flow database. The
decisions. It will also aid in determining that BU’s trended data, the BU budget and the most treasury forecasting analyst will analyze
accurate and timely payments are disbursed and recent forecast submitted by each BU. From the forecasted information to ensure that all expected
that funds are received. Management reports master cash flow database, management reports payments are authorized and valid.
could potentially not accurately reflect Company will be created for review, approval and decision- A batch report with the upcoming 10-day forecast
ABC’s current cash position. making. Treasury cash operations will run and will be automatically sent to treasury at noon
review a change report to identify updates made every (Insert Day). All information will be
to the initial forecast. aggregated in the database to create a master
cash flow database (including treasury’s trended
data, each BU’s trended data, the BU budget and
the most recent forecast submitted by each BU).
Actual data that has been received or paid will be
updated by the treasury forecasting analyst
throughout the day.
The master cash flow database will be used to
create management reports, including the daily
variance report, investment/borrowing position
report, weekly variance report, BU cash flow
forecast report – (Insert Day) noon, and cash flow
management summary report.
10
9
(2/2)
Action Plan
Updates are made by the BU throughout the

week for forecasted information. If the
amount to be disbursed changes within the
first five business days, it is considered a
rush payment and must follow the rush
payment process. For any changes made to
the forecast outside of the next five
business days and greater than a X%
variance of the original forecasted amount,
the payment must be approved by the BU
manager and the treasurer. If the cash flow
change is not approved, the change must
be forecasted for payment in accordance
with treasury’s policy.
A change report will be run three times
throughout the day to identify any updates
made to the forecast. This information will
be updated in the master cash flow
database, so the most up-to-date and
approved information is depicted in the
database.
In the interim, a database will be used to
compile and report all master cash flow
forecast information. The database will be
utilized until the proper implementation and
testing can be performed on the new
treasury system.
11
0
Design
option
(2/2)
Action Plan
Updates are made by the BU throughout the

week for forecasted information. If the amount to
be disbursed changes within the first five
business days, it is considered a rush payment
and must follow the rush payment process. For
any changes made to the forecast outside of the
next five business days and greater than a X%
variance of the original forecasted amount, the
payment must be approved by the BU manager
and the treasurer. If the cash flow change is not
approved, the change must be forecasted for
payment in accordance with treasury’s policy.
A change report will be run three times
throughout the day to identify any updates made
to the forecast. This information will be updated in
the master cash flow database, so the most up-
to-date and approved information is depicted in
the database.
In the interim, a database will be used to compile
and report all master cash flow forecast
information. The database will be utilized until the
proper implementation and testing can be
performed on the new treasury system.
11
1
TREASURY CASH FLOW FORECASTING
PHASE II: IMPLEMENTATION AND CONTROL
Perform Testing,
Coordinate IT-Related Develop and Execute Monitor Control
Finalize Design and
Changes Training Environment
Implement
• Determine and request • Review the master cash flow • Identify key business unit • Assess potential monitoring
required IT forecast database and custom stakeholders associated with reports and techniques
improvements/updates SAP reports with IT. Implement the weekly forecasting available from the
(custom SAP reports, suggested changes as process. SAP/database.
database design). necessary. • Develop and document training • Define and monitor the
• Prioritize the list of required IT • Perform required testing on programs to assist business forecast reporting protocol
improvements (i.e., value of both the master cash flow units with implementation of (frequency, recipients, content,
the change vs. effort to make database and custom SAP new forecasting procedures. action required, etc.).
the change). reports. Implement suggested • Hold a training • Report BU forecasting
• Identify which tasks could be changes as necessary. session/presentation to performance results to
performed manually (while • Finalize the design and introduce revised forecasting management weekly.
waiting for IT changes and functionality for the database procedures to each business
support). and custom report. unit separately.
• Develop a project plan and • Implement the final version of • Determine the level of need
timelines to modify/implement custom database and SAP (by business unit/position) for
infrastructure. reports. more detailed desktop
• Coordinate the database procedures.
design and creation process • Introduce performance metrics
with IT. with the training materials.
• Develop a critical path and
timeline for IT support
activities.
11
2
TREASURY CASH FLOW FORECASTING Design
option
Coordinate IT-Related Perform Testing, Finalize Develop and Execute Monitor Control
Changes Design and Implement Training Environment
• Determine and request • Review the master cash • Identify key business unit • Assess potential monitoring
required IT flow forecast database and stakeholders associated reports and techniques
improvements/updates custom SAP reports with IT. with the weekly forecasting available from the
(custom SAP reports, Implement suggested process. SAP/database.
database design). changes as necessary. • Develop and document • Define and monitor the
• Prioritize the list of required • Perform required testing on training programs to assist forecast reporting protocol
IT improvements (i.e., value both the master cash flow business units with (frequency, recipients,
of the change vs. effort to database and custom SAP implementation of new content, action required,
make the change). reports. Implement forecasting procedures. etc.).
• Identify which tasks could suggested changes as • Hold a training • Report BU forecasting
be performed manually necessary. session/presentation to performance results to
(while waiting for IT • Finalize the design and introduce revised management weekly.
changes and support). functionality for the forecasting procedures to
• Develop a project plan and database and custom each business unit
timelines to report. separately.
modify/implement • Implement the final version • Determine the level of need
infrastructure. of custom database and (by business unit/position)
• Coordinate the database SAP reports. for more detailed desktop
design and creation process procedures.
with IT. • Introduce performance
• Develop a critical path and metrics with the training
timeline for IT support materials.
activities.
TREASURY CASH FLOW FORECASTING Design
option
Monitor Control
Coordinate IT-Related Perform Testing, Finalize Develop and Execute
Environment
Changes Design and Implement Training
Plan
• Determine and request required • Review the master cash flow • Identify key business unit • Assess potential monitoring
IT improvements/updates forecast database and custom stakeholders associated with reports and techniques
(custom SAP reports, database SAP reports with IT. Implement the weekly forecasting process. available from the
design). suggested changes as • Develop and document training SAP/database.
• Prioritize the list of required IT necessary. programs to assist business • Define and monitor the
improvements (i.e., value of the • Perform required testing on units with implementation of forecast reporting protocol
change vs. effort to make the both the master cash flow new forecasting procedures. (frequency, recipients,
change). database and custom SAP • Hold a training content, action required, etc.).
• Identify which tasks could be reports. Implement suggested session/presentation to • Report BU forecasting
performed manually (while changes as necessary. introduce revised forecasting performance results to
waiting for IT changes and • Finalize the design and procedures to each business management weekly.
support). functionality for the database unit separately.
• Develop a project plan and and custom report. • Determine the level of need (by
timelines to modify/implement • Implement the final version of business unit/position) for more
infrastructure. custom database and SAP detailed desktop procedures.
• Coordinate the database design reports. • Introduce performance metrics
and creation process with IT. with the training materials.
• Develop a critical path and
timeline for IT support activities.
11
4
FRAMEWORKS: TREASURY RISK MANAGEMENT
Internal Auditor Risk ModelSM
Environment Information For
Process Risk
Risk Decision-Making Risk
Competitor Financial Empowerment Governance Strategic

Customer Wants Leadership Organizational Environmental Scan
Price
Technological Authority/Limit Culture Business Model
Interest Rate
Innovation Performance Ethical Behavior Business Portfolio
Currency
Sensitivity Incentives Board Effectiveness Investment Valuation/Evaluation
Equity
Stakeholder Change Readiness Succession Planning Organizational Structure
Expectations Commodity
Communications Measurement (Strategy)
Rating Agency Financial Instrument
Reputation Resource Allocation
Capital Availability Information Image and Branding Planning
Liquidity
Sovereign/Political Technology Stakeholder Lifecycle
Cash Flow
Legal Integrity Relations
Opportunity Cost
Regulatory Access
Concentration
Industry Availability Integrity
Volatility
Financial Markets Infrastructure Management Fraud Public Reporting
Catastrophic Loss Security Employee Fraud Financial Reporting Evaluation
Credit
Default Adaptability Third-Party Fraud Internal Control Evaluation
Concentration Illegal Acts Executive Certification
Settlement Unauthorized Use Taxation
Collateral Pension Fund
Regulatory Reporting
Operations
Operational
Customer Satisfaction Performance Gap Business Interruption
Human Resources Cycle Time Service Failure Budget and Planning
Knowledge Capital Channel Effectiveness Environmental Contract Commitment
Product Development Partnering Health and Safety Measurement
Efficiency Outsourcing/ Privacy/Information Alignment
Capacity Off-Shoring Security Accounting Information
Scalability Compliance Trademark/Brand
Erosion
11
5
FRAMEWORKS: SIX ELEMENTS OF TREASURY RISK
MANAGEMENT
Business
Business Organization Management Models and Systems
Strategies and
Processes and People Reports Assumptions and Data
Policies
• Global Cash and • Global Treasury • Skills and • Cash Position vs. • Revenue and • Global Bank and
Treasury Risk Operations Competencies Forecast Cash Forecasting Cash Information
Management • Global Cash • Training and • FX Liabilities- • FX Exposure and Reporting
Vision, Goals and Management Development Hedged and Un Risk Limitation • Treasury
Objectives • Global Cash Hedged Position
• Roles and • Investment Yield Workstation
• Comprehensive Forecasting • Investments-
• Liquidity Responsibilities and Total Return • ERP
Policies and Liquidity, Yield,
Procedures Management • Organization Duration, Etc. • Interest Rate Risk • Capital Spending
• FX Risk Design • Liability and Debt Model
• Process Goals • Investment
Mitigation and Schedules
and Strategies • Corporate Culture • Pro-Forma Custodian
Hedging • Banking Services Financial Models Valuation and
• Effective • Investment and Fees
• Capital Spending Maturity Data
Information Management • Treasury Activity
Reporting • Business Commitments • Data Integrity
and Performance and Assumptions
Interruption and • Authorization and
• Organization Metrics
Disaster • Alternative Yield Limits System
Structure • Global
Recovery Calculation
• Effective • Vendor Approval Authorizations:
Authorization Commitment and
and Validation
Validation • Disbursement Disbursements
Approval and • Vouchered,
Limits Matrix Approved and
• EFT and Check Prior Payments
Approval Process Report
There is a risk if infrastructure component is deficient:
Management’s Business system

People are unable to Current reports do not
Business processes do methodologies do not information is not
perform necessary provide information for
not achieve strategy. adequately analyze available for analysis
processes adequately. effective management.
relevant information. and reporting.
Note: Activities in orange represent areas that have been noted for process redesign and improvement through the Payment Authorization and Release and
Cash Flow Forecast Infrastructure project.
11
6
TREASURY RISK MANAGEMENT CAPABILITY
MATURITY MODEL
Organization
Business Processes Systems
and Management Models and
Strategies and and Data
Management Reports Assumptions
and Policies Procedures
Structure
Realization Aligned, strategic

of Value Treasury processes
objectives are in Critical business Aligned, strategic
Proposition are integrated and Follow-up and Fully integrated
place. Risk issues are issues are addressed. methodologies exist
effective. Best planning are fully systems are used for
Optimized identified with Organization/process/ that emphasize
practices are developed, automated treasury risk and
appropriate integrated individual performance continuous
continuously and consistent. financial analysis.
policies and measures are aligned. improvement.
benchmarked.
responsibilities.
Requisite treasury
Treasury risk Some nonintegrated
The initial execution of expertise and Treasury information is
management Models and tools are systems and data are
Treasury objective and knowledge are in high-quality, and self-
Managed processes and sophisticated and available to support
treasury resources place. Teamwork and assessment is
techniques are robust. treasury risk
aligned against plans communication are commonplace.
effectively utilized. management.
strong.
Process Annual treasury plans Processes are Treasury functions are Key risks are tracked
Models available for Some systems and
are developed, defined. Strategic centralized. Backup and define standard
Defined decision-making are information are
Maturity initiating strategic treasury and finance capability and training benchmarks and
well-developed. supported by policies.
positioning actions. alliances are in place. are offered. internal audits.
Functions are defined, Limited systems

Strategic objectives Processes are Key internal treasury
staff support is in require manual input
and informal polices established and information is Simple models are
Repeatable place and and support, and
are occasionally repeating. Reliance on available with audits used inconsistently.
training/exposure is procedures are
focused on. people continues. occurring.
limited. manual.
Treasury is not Formal processes are

Critical information is Treasury
categorized as a limited or nonexistent. Leadership does not Models do not exist,
Initial/Ad not available, and system/information is
hoc
strategic opportunity, The environment is exist, and qualified and reliance on people
internal auditing does disparate and
resulting in no unstable and people staff is lacking. continues.
not occur. inefficient.
direction or policies. dependent.
Risk of
Failure This represents the current state of the treasury department for each infrastructure element.
This represents the future state of the treasury department for each infrastructure element.
117

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TREASURY REVIEW AUDIT

01 Related corporate policies and procedures were

03 letters of credit, wire transfers and trust fee

A high-level review of the information systems

04 environment as related to the corporate finance

Treasurer (Insert Name)

Assistant Treasurer (Insert Name)

Corporate Accounting Manager (Insert Name)

Senior Counsel (Insert Name)

Director of Corporate Business

Information Services (Insert Name)

Senior International Treasury

Senior Treasury Analyst (Insert Name)

Treasury Coordinator (Insert Name)

Accounting Analyst (Insert Name)

Associate Accounting Analyst (Insert Name)

Financial Systems Support (Insert Name)

Legal Entities Coordinator (Insert Name)

1 Domestic and international cash

Responsible Priority Completion

Responsible Priority Completion

Responsible Priority Completion

Responsible Priority Completion

Responsible Priority Completion

Responsible Priority Completion

have been delivered to treasury for treasury safe.

Responsible Priority Completion

Responsible Priority Completion

Create a centralized cash management Treasury is now addressing an integrated 1

Implement a “self-control” approach to assessing The degree of improvement is limited by N/A

Maintain compliance to loan restrictions. Domestically, corporate accounting N/A

Ensure that investment, borrowing, disbursement Generally, investments, borrowings and 6

We judgmentally selected a sample of wire transfer payments to determine if:

We judgmentally selected a sample of issued commercial paper to determine if:

Please see the Action Matrix section for further details.

Please see the Action Matrix section for further details.

• This review was limited to the corporate treasury operations at headquarters.

Foreign Exchange Exposure Management*

*Limited detailed testing was performed

02 Interview key treasury and accounting personnel.

03 Observe performance of key treasury processes.

04 Perform detailed testing of outgoing wire transfers and investments.

05 Review domestic and international cash and investment account reconciliations.

06 Review investment manager statements.

07 Analyze the calculation of yen exposures for Q2-YY.

08 Analyze foreign exchange hedging forwards and options for Q2-YY.

09 Evaluate the overall internal control environment.

11 Report on observation and management action plans.

Name A Treasury Manager

Name B Cash Analyst

Name C Accounting Clerk

Your help is key to the success of this project!

Wire Transfer (System A) Authorization Matrix

Dollar Limits Per User Per

Release equals $X million

Release equals $X million

Release equals $X million

Release equals $XX million

Wire Transfer (System A) Authorization Matrix

Dollar Limits Per User Per

Release equals $X million

Release equals $X million

Release equals $X million